Oil falls: Unemployment rates rise
Crude falls as jobless rate rises
Crude dropped to a one-week low today after the US unemployment rate rose to a 26-year high, unsettling previous hopes that the fledgling economic recovery would boost flagging oil demand.
US crude settled $2.19, or 2.8%, lower at $77.43 per barrel making it the lowest settlement since 30 October.
London Brent crude closed at $2.12, or 2.7% lower, at $75.87 per barrel.
US unemployment climbed to its highest level in more than 26 years, rising 0.4 percentage point to 10.2%, the Labor Department reported.
This surpassed economists forecasts of an increase to 9.9%.
"Today's unemployment figure was shocking and more than most expected and the oil market is adjusting now. Reality is setting in," said Carl Larry, analyst with Oil Outlooks and Opinions in Houston.
The report caused oil-market participants to reflect on lackluster oil demand in the US rather than recent stock draws that had rallied the market this week.
The US Department of Energy reported Wednesday that total products supplied over the past four-weeks was running 4.5% lower over the same period a year ago, at 18.8 million barrels a day, but this was largely overlooked.
"Today it's all about the demand numbers and whether rising unemployment will lead to a lack of demand for transportation fuels," said Larry.
Continued high unemployment in the US could curb discretionary spending, dragging on gasoline and diesel demand.
"We have some green shoots showing in the economy, but unemployment is a lagging indicator and, as it's getting worse, it sends mixed signals about the economy," said Antoine Halff, analyst with Newedge in New York.
He noted that, with the jobless figures getting worse, this does not bode well for household consumption and gasoline demand in particular.