Oil prices fall as US job losses mount

October 03, 2009 08:07:29 AM

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Oil prices fell Friday as official data revealed a jump in job losses and the unemployment rate in the United States, the world's biggest energy-consuming nation.

New York's main contract, light sweet crude for November delivery dropped 87 cents to close at 69.95 dollars a barrel.

London's Brent North Sea crude for delivery in November shed 1.12 dollars to settle at 68.07 dollars a barrel.

The US Labor Department reported Friday that job losses accelerated to 263,000 in September and the unemployment rate rose to 9.8 percent, pouring cold water on hopes for strong recovery from recession.

Payroll losses were far worse than expectations for a loss of 175,000 jobs and a revised loss of 201,000 in August.

"Employment will decline by about an additional 800,000 jobs before bottoming out in the first half of next year," said Aaron Smith, a senior economist for Moody's Economy.com.

He said that a forecast for the unemployment rate to peak at 10.1 percent in the first half of next year "may be too optimistic."

Payrolls have now dropped for 21 consecutive months and since the start of the recession, the number of unemployed has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8 percent, according to the Labor Department.

"This grim picture is still measuring the fallout from the severe contraction over the past 20 months," said analyst Mike Fitzpatrick of MF Global.

"Investors, consumers and policymakers all have their fingers crossed that the worst has passed because there certainly is not a stream or a continuum of data that evidences a strong, sustainable recovery is underway."

But he said that current economic recovery could sustain oil prices at current levels and higher.

Barclays Capital said in a report Friday that after a brief test of the downside, oil prices were back in the middle of their recent 65-75 dollar per barrel trading range.

"We still expect prices to transition gradually to 70-80 dollars over the next month or so," the report said.

The OPEC cartel has already signalled comfort with that range.

Oil prices had edged higher Thursday as the market also assessed "constructive" talks between key oil producer Iran and world powers over Tehran's sensitive nuclear program.

Oil demand plunged after the global economy slipped late last year into its worst recession since the 1930s.

This sent oil prices tumbling from historic highs of more than 147 dollars in July 2008 to around 32 dollars in December. Prices have since recovered but investors remain concerned over the pace of the upturn.