Oil prices extend declines
Crude falls as the latest economic report paints a dismal picture, inflating demand worries.
 |
| Click the chart to track the latest commodity prices. |
NEW YORK (CNNMoney.com) -- Oil prices extended their declines Thursday as further signs of economic weakness signaled a slowdown in demand.
U.S. crude for February delivery fell 93 cents to settle at $41.70 a barrel after earlier being down as much as $1.89 a barrel. On Wednesday, a report of a larger-than-expected supply buildup sent prices falling $5.95, or more than 12%.
The Labor Department reported Thursday that 467,000 people filed for unemployment benefits last week, which was fewer than expected, but still much higher than the 330,000 claims filed in the same week a year ago.
Investors were looking to Thursday's jobless claims numbers along with Friday's jobs report to get a sense of how much demand has fallen, said Nimit Khamar, analyst with Sucden Financial in London.
Essentially, any bad news inflates recessionary jitters.
"People are expecting large losses. It's always worse when you see the massive numbers," said Khamar.
Economy in focus: The labor market has been in focus all week, starting with the Federal Reserve saying unemployment will continue to rise "significantly" into 2010, according to minutes from the Fed's December meeting, released Tuesday.
On Wednesday, an industry report showed a 45% increase in job losses in December compared to the prior month. And the number of job cuts announced in December was more than four times greater than the same period in 2007, according to another report.
"Yesterday focused us back on the economy," said Khamar. That focus drove prices down a whopping 12%.
The government also reported a massive 6.7 million barrel buildup in crude stockpiles for the week ended Jan. 2, a sign that demand was seriously impaired.
Concerns that declining economic activity was draining demand for petroleum products dominated the market through the last half of 2008. As the global economy crumbled, oil prices fell from a record high of $147.27 a barrel last summer.
Crude got an early boost after Christmas as members of the Organization of Petroleum Exporting Countries, which produces about 40% of the world's oil, began cutting production to bolster prices, and geopolitical tensions raised worries about a future disruption in supplies.
Gasoline: The boost helped send gasoline prices up 3.5 cents to a national average of $1.762 a gallon from Wednesday, according to a survey from motorist group AAA.
However, prices may continue trending higher if demand picks up. This is the time of year that buyers, such as gas stations, start contracting gasoline deliveries for the spring and summer. And if buyers anticipate drivers returning to the roads, that will boost retail gasoline prices as well.
"We're just now getting into a time of year when we start to see gasoline demand perk up," said Darin Newsom, senior analyst with market research firm DTN in Omaha.
However, the price of gas is inextricably linked to oil, and should the oil market continue to decline even further, gasoline will fall along with it, he added.
OPEC: Venezuela detailed its production cuts Thursday as part of an OPEC pledge to reduce oil supplies by 2.2 million barrels a day. Venezuela's oil ministry said that the country's state-owned oil company cut production by 189,000 barrels per day to meet its OPEC quota.
The country also warned refiners that it would be reducing shipments of crude oil to refiners in the U.S., particularly to the Chalmette Refinery in Louisiana, operated by ExxonMobil (XOM, Fortune 500), and the Sweeny Refinery in Texas, run by ConocoPhillips (COP, Fortune 500).
"With (economic) sentiment dampened, it doesn't matter what OPEC is doing at the moment," said Khamar. 
