Economic Gloom Triggers Slide in Crude Oil
Crude oil futures dropped for the third consecutive day on Thursday, on the release of a U.S. government report which showed the number of people remaining on jobless rolls last week rose to a 26-year high.
U.S. light, sweet crude fell 93 cents, or 2.2 percent, to settle at $41.70 a barrel at the close of floor trading on the New York Mercantile Exchange.
Today’s drop follows on the heels of Wednesday’s 12 percent drop, the largest percent decline in 7 years, after a U.S. Energy Information Administration weekly report showed crude stocks rose last week by more than seven times the 900,000 barrel increase most analysts had expected.
Prices originally rose as much as 2.4 percent to $43.63 earlier in the today as rocket attacks on Israel launched from Lebanon created concern that the regional conflict will widen and disrupt Middle East supplies.
But those fears were quickly put aside for the time being after the latest employment data.
A Labor Department report due out tomorrow may send shock waves throughout the market if the data is anything worse than expected. According to economists surveyed by Bloomberg News, they expect it to show that the economy lost another 510,000 jobs in December. That would bring the unemployment rate to 7 percent, and a six-decade high of 2.4 million jobs lost.
Crude oil stocks rose 4.1 million barrels last week at the key delivery point in Cushing, Oklahoma. Current stockpiles at Cushing are at a record high of 32.2 million barrels.
The rise in crude oil inventories is a direct result of the drop off in demand during the current economic recession.
OPEC has pledged to cut production in order to bring supplies on par with current demand.