Oil hit by jobs report
Crude investors worried $900 billion economic stimulus bill won't help oil demand recover this year.
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NEW YORK (CNNMoney.com) -- Oil prices fell near $40 a barrel in a volatile session Friday after a dismal labor market report renewed concern about falling demand, and stifled optimism stemming from the stimulus bill being debated in Congress.
U.S. crude for March delivery ended the day down $1.00 to $40.17 a barrel in New York.
Employers in the U.S. cut 598,000 jobs last month and the unemployment rate rose to 7.6%, according to a government report released Friday. It was the largest monthly decline in jobs since December of 1974, and brings total job losses for the past three months to 1.8 million.
The weakening job market "just continues to cast a shadow of a doubt over whether this demand is going to start to pick up again," said Darin Newsom, senior analyst with market research firm DTN.
Oil prices dropped to a trading low of $38.60 a barrel just after the report's release.
The United States is the world's largest oil consumer, and concern about the economy has helped drive oil prices down from a record high of $147.27 a barrel last summer.
Investors have been looking to economic reports to get a read on oil demand.
Job numbers in particular can indicate how much consumers are willing to spend on gas and travel. "It has a direct effect on petroleum demand," said Newsom.
However, "it's just the next brick in that wall of our economic problem," he added.
Stimulus: Oil prices touched a trading high of $42.68 a barrel Friday as Congress debated the Obama administration's $900 billion stimulus bill.
Investors were optimistic that Congress would vote on the bill soon, sending other markets such as stocks soaring. But oil prices were unable to sustain a rally.
"All the optimism in the world is not going to turn factories on right now and get people to travel more," said James Cordier, founder of brokerage OptionSellers.com..
Most of the spending initiatives that are included in the bill won't start to have an economic effect until about 2010 or 2011, and it also doesn't address the current oil surplus brought on by crumbling demand, Cordier said.
"The U.S. is just swimming in oil right now," he said.
Gasoline: Meanwhile the price of gasoline rose 0.3 cents to a national average of $1.91 a gallon, according to a daily survey of gas station credit card swipes from motorist group AAA. 
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