Oil falls after jobs report
Crude futures retreat after government says 525,000 jobs were lost last month, reviving concern about weaker demand.
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NEW YORK (CNNMoney.com) -- Oil prices fell Friday after a government report showing significant job losses added to concerns about weaker demand in an ailing economy.
U.S. crude for February delivery fell 87 cents to settle at $40.83 a barrel on the New York Mercantile Exchange. The price fell below $40 a barrel immediately after the jobs report, but rebounded by day's end.
Retail gas prices rose for the tenth day in a row, edging up 2 cents overnight to a national average of $1.782 a gallon.
The government said Friday that 524,000 jobs were lost in December, bringing the total for 2008 to just below 2.6 million. That makes 2008 the worst year for job losses since 1945, when 2.75 million jobs were lost as the nation's industrial production geared down from World War II. The December unemployment rate surged to 7.2%.
The jobs data highlight "the prospect that the U.S. economy will continue to weaken," said Tom Pawlicki, an energy analyst at MF Global Research in Chicago. It also fueled concerns about further declines in retail sales and manufacturing activity, he added.
In light of such a grim outlook, "there's really no reason to buy economically sensitive investments like oil this week," Pawlicki said.
The global economic slowdown has severely undercut demand for crude and has driven the price of oil down more than $100 a barrel from the record $147.27 set six months ago.
OPEC: The dismal jobs number overshadowed indications of production cuts among OPEC members aimed at driving up oil prices.
Over the past week, OPEC members Venezuela, Iran and Kuwait all showed signs that they were complying with the group's pledge to bolster oil prices by removing 2.2 million barrels a day from the market.
It's possible OPEC may have been able to cut back enough to keep oil bouncing around between $40 and $50 a barrel, according to James Williams, energy economist with WTRG Economics in London, Ark.
But the market remains skeptical of OPEC's ability to keep the price buoyed amid such weak demand.
On Wednesday, the Department of Energy showed crude stockpiles rose by a whopping 6.7 million barrels for the week ended Jan. 2. That far surpassed experts' forecast of a 1.5 million barrel rise, according to a poll by research firm Platts.
Still, OPEC's production cuts "could be bullish once inventory comes down," Pawlicki said.
Natural gas: The oil market is also concerned about the disruption of natural gas supplies in parts of Europe due to payment dispute between Russia and Ukraine.
European Union officials sought Friday to finalize a deal that would put monitors in place along gas transit routes that pass through Ukraine. Moscow is concerned that Kiev is siphoning gas meant for other customers in Europe.
Russia's state-controlled energy monopoly, Gazprom, cut off the flow of gas for a number of days, which has forced factories to shut down and caused electricity shortages.
The fallout from the dispute could put more strain the European economy and further undermine demand for oil, Pawlicki said.
Industry cutbacks: Oil's rapid decline in price from a record high has put the brakes on many oil industry projects as they become unprofitable.
Oilfield service companies Schlumberger Ltd (SLB)., and Halliburton Co. (HAL, Fortune 500) said Thursday that they were cutting manpower as the world economies slow.
And last week, the number of oil and natural gas rigs in the United States searching for or pumping energy supplies fell by 5.7%, the largest decline in 15 years, according to oilfield service company Baker Hughes.
Retail gasoline: The price of gasoline rose for the tenth day in a row.
The national average price for a gallon of regular unleaded gasoline increased to $1.782 a gallon, up 2 cents from the previous day's price of $1.762, according to a daily survey by the American Automobile Association.
Over the last ten days gas prices have increased by 16.6 cents, or 10.2%. But the current national average is still $2.33 below or 56% off the record high price of $4.114 that AAA reported in July. 
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