Published: July 02, 2009 11:43 am      

Oil prices tumble as Europe and the US shed jobs

By CHRIS KAHN

AP Energy Writer

NEW YORK (AP) — Oil prices tumbled to their lowest level in a month Thursday following the release of woeful job numbers in Europe and the U.S.

Benchmark crude for August delivery fell $2.34, more than 3 percent, to $66.97 a barrel on the New York Mercantile Exchange. Prices dropped as low as $66.54 a barrel earlier in the day.

In the United States a Labor Department report showed the economy lost a larger-than-expected 467,000 jobs in June, with the unemployment rate rising to 9.5 percent from 9.4 percent in May, underscoring concerns about the pace of economic recovery.

Analysts had been expecting payroll reductions of 363,000 in June. Since the recession began in December 2007, the economy has lost a net total of 6.5 million jobs.

That has destroyed demand for energy on numerous levels. Employees who have lost jobs or are in fear of losing jobs are driving less and buying fewer goods, many of them petroleum based. Factories also have curbed production and are using less natural gas and electricity.

U.S. stores of natural gas continue to grow as energy demand weakens. The government reported that the nation’s surplus grew more than expected last week, and it’s now 21 percent above the five-year average.

The job numbers in the U.S. came on the heels of an awful employment picture in Europe.

Unemployment in the 16 countries that use the euro spiked to a ten-year high in May. The seasonally adjusted unemployment rate for the euro zone in May stood at 9.5 percent, up from April’s 9.3 percent and hitting its highest level since May 1999.

The euro slipped to $1.4013 on Thursday from $1.4148 late Wednesday in New York, while the British pound was down to $1.6347 from $1.6474. That, in effect, makes crude more expensive, and pushed even more money out of crude markets to end the shortened week.

Nymex is closed Friday for the July Fourth holiday.

Oil prices have doubled since March, when the Fed committed $1.2 trillion dollars to prop up the banking industry. Investors poured money into commodities like oil as a hedge against inflation, and foreign traders found they had more buying power as the dollar weakened.

If there is any benefit from of an awful economy, it can be found at the pump.

Retail gas prices have been slipping since Father’s Day. They lost less than a penny overnight to a new national average of $2.629 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices are 10.4 cents more per gallon than a month ago. At this time last year, gasoline cost $4.09 per gallon.

In other Nymex trading, gasoline for August delivery fell 6.19 cents to $1.7971 a gallon and heating oil lost 5.85 cents to $1.7072 a gallon. Natural gas for August delivery dropped 2.9 cents to $3.766 per 1,000 cubic feet.

In London, Brent prices dropped $2.11 to $66.68 a barrel on the ICE Futures exchange.

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Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore.