HOUSTON - Oil prices neared US$60 a barrel Thursday, the lowest point in about a year and a half, as a growing number of economic reports point to a long and painful recession.
The number of Americans continuing to draw unemployment benefits surged to a 25-year high, the Labor Department said Thursday, and nation's retailers saw their sales plummet last month to the weakest October level since at least 1969.
When the economy slows, the demand for energy fades.
Light, sweet crude for December delivery fell more than 6.7 per cent, or $4.36, to US$60.94 a barrel on the New York Mercantile Exchange. Prices tumbled as low as US$60.16 at one point, a level last seen in March 2007.
Many oil analysts still think a natural range for crude is closer to US$80, but few saw the extent of deteriorating global economy.
Oil prices have now fallen nearly 60 per cent since peaking at US$147.27 a barrel in mid-July. They surged above US$70 Tuesday as Americans elected Barack Obama their first black president, but a crude sell-off began the following day when prices dipped 7.4 per cent.
Also pressuring crude prices were interest rate cuts across Europe, where economic leaders were trying to spark growth.
Oil analyst Peter Beutel of Cameron Hanover said crude was falling because of a stronger dollar, renewed fears of recession and weaker equities market.
"Oil prices ... have been searching for a bottom for the last several days," the Cameron Hanover report said.
And despite a government report showing storage levels in the U.S. rose less than expected last week, prices for natural gas fell, too.
Meteorologist predictions of a cold winter have been pushing natural gas prices up recently.
In its weekly report, the Energy Department's Energy Information Administration said natural-gas inventories held in underground storage in the lower 48 states rose by 12 billion cubic feet to about 3.41 trillion cubic feet for the week ending Oct. 31.
Analysts had expected a boost of between 20 billion to 25 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
"The (EIA) report was kind of bullish actually and the market went the other way," said Phil Flynn, an analyst at Alaron Trading Corp. "It's just the overall malaise. Earnings today haven't been anything to write home about. We're readjusting commodities based on recessionary like numbers."
Wall Street slumped again Thursday, sending stocks lower for a second day after Cisco Systems Inc. reported crumbling demand. The Dow Jones industrial average fell 275 points.
The dollar strengthened after the European Central Bank cut its key rate by half a percentage point to 3.25 per cent Thursday, joining the Bank of England, Swiss and Czech central banks as they confront the looming recession.
The ECB announced the cut from 3.75 per cent shortly after the Bank of England lowered its key interest rate by a startling 1.5 percentage points to 3 per cent. The Bank of England's cut was more than the full percentage point that most analysts had predicted and the biggest cut in 27 years.
Commodities such as oil are used as a hedge against inflation and a weak dollar. When a central bank cuts interest rates, it tends to weaken the national currency, meaning the dollar can gain value.
When the dollar strengthens, it makes oil more expensive to buyers dealing in other currencies.
Stocks fell throughout Asia and Europe on Thursday, led by Japan's benchmark Nikkei 225 stock average, down 6.5 per cent, while Hong Kong's Hang Seng Index slid 7.1 per cent.
London's FTSE share index and Germany's DAX both fell 4.6 per cent, while France's CAC-40 was 3.8 per cent lower.
Retailers' October sales figures showed consumers pulling back spending sharply, while a Labor Department report said the number of people continuing to draw unemployment benefits jumped by 122,000 to 3.84 million in late October. It was the highest level since late February 1983, when the country was struggling to recover from a long and painful recession.
Other economic indicators out of the U.S. this week suggest the world's largest economy may be heading for its worst recession in decades. A Commerce Department report Tuesday said factory orders fell 2.5 per cent in September from August, much worse than analysts had predicted.
On Monday, U.S. manufacturers reported poor figures for October, showing the worst reading in more than a quarter century.
The slowdown, sparked by a credit crisis that began last year, has spread across the world.
"The overriding factor is still the gloom in the global economy," said Gerard Rigby, energy analyst with Fuel First Consulting in Sydney. "Oil took sentiment straight from the stock market."
Gasoline fell again overnight, dipping 2.5 cents to a U.S. national average of US$2.34 for a gallon of regular unleaded, according to auto club AAA, the Oil Price Information Service and Wright Express. The average price has fallen nearly 33 per cent in the past month and, according to AAA, could be headed to $2 a gallon nationally by year's end.
In other Nymex trading, gasoline futures fell 8.6 cents to $1.338 a gallon. Heating oil dropped 9.8 cents to $1.956 a gallon while natural gas for December delivery fell 31 cents to fetch $6.935 per 1,000 cubic feet.
