Oil tumbles below US$44 a barrel

COLUMBUS, Ohio: Oil tumbled below US$44 a barrel Thursday to levels last seen nearly four years ago as the number of American workers continuing to receive government aid reached a 26-year high, factory orders hit an eight-year low and major corporations slashed jobs.

Though the unprecedented decline in energy prices provides some relief to consumers and businesses, it has occurred as the U.S. dips into recession.

Also hitting new lows were average retail gasoline prices, which fell below $1.80 a gallon (below 47 cents a liter) nationally for the first time since January 2005.

Part of the reason gas prices have fallen so low is that many people no longer have jobs to drive to and fewer people have money to spend shopping. Gasoline futures fell below a dollar a gallon.

Veteran energy analysts were stunned as they watched light sweet crude fall $2.91, more than 6 percent, to $43.88 on the New York Mercantile Exchange by early afternoon.

Just four months ago, crude rocketed close to $150 and the average gallon of gasoline went for more than $4 ($1.08 a liter).

In London, January Brent crude tumbled more than 6 percent, or $2.82, to $42.62 on the ICE Futures exchange.

No one believed crude would lose $100 in value by December, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

Some analysts believe demand could evaporate even more early next year because of a severe global economic slowdown.

"I think the traders are looking at that and they're saying, 'Well, December is OK, it's relatively balanced here and there, but my goodness all of these layoffs after Christmas, the cold weather, the cocooning, the bills coming due after Christmas, January is just going to be awful,''' Kloza said.

Dour economic reports continue to spill out during a week when the National Bureau of Economic Research said the economy fell into a recession in December 2007.

The government said the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, when the economy was emerging from a recession.

Factory orders plunged a bigger-than-expected 5.1 percent in October caused by big cutbacks in demand for steel, autos, computers and heavy machinery.

It was the largest decrease since an 8.5 percent fall in July 2000.

The Labor Department reported that initial claims for unemployment insurance dropped to a seasonally adjusted 509,000, from an upwardly revised figure of 530,000 for the previous week.

That was significantly below analysts' estimates of 537,000, according to a survey by Thomson Reuters.

The four-week average of initial claims, which smooths out fluctuations, increased to 524,500, also the highest level since December 1982, the department said.

The U.S. work force is roughly 50 percent larger than it was in the early 1980s.

As a result, the department said the proportion of workers continuing to receive jobless benefits matches a level reached 16 years ago, in September 1992, when the economy was slowly recovering from recession.

"People are waking up to the fact that there may not be much demand,'' said Phil Flynn, an analyst at Alaron Trading Corp. There were signs that the economic environment is worsening.

On Thursday AT&T said it was slashing 12,000 jobs, or about 4 percent of its work force.

Chemicals company DuPont said it will cut 2,500 jobs and media conglomerate Viacom Inc. said it will eliminate about 850 jobs.

Many retailers posted weak sales for November, despite a shopping boost the day after Thanksgiving. Results from Wal-Mart Stores Inc. beat Wall Street estimates.

Wal-Mart did say that falling gas prices may be bringing more people out to its stores. However, Costco Wholesale Corp., usually a strong performer, reported a bigger-than expected sales decline.

And mall-based stores such as teen stalwart Abercrombie & Fitch Co., Kohl's Corp. and Macy's Inc. fared much worse, reporting percentage declines of over 10 percent.

Oil prices fell even after central banks in Europe and elsewhere slashed interest rates in an effort to spark their economies.

The European Central Bank lowered its rate to 2.5 percent from 3.25 percent, and the Bank of England, Sweden's Riksbank and New Zealand's central bank also cut rate.

Prices at the pump continued to decline, falling 1.4 cents overnight to $1.789 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express.

That price is down 60.2 cents a gallon from just last month.

Though there are signs that Americans are able to drive more with prices plunging, Flynn does not see enough demand to justify big increases in oil and gas prices.

"We have entered a new era of lower gasoline prices and oil prices,'' he said.

The Energy Department's Energy Information Administration said in its weekly report that natural-gas inventories held in underground storage in the lower 48 states fell by 64 billion cubic feet to about 3.36 trillion cubic feet for the week ended Nov. 28.

Analysts had expected a drop of between 61 billion and 66 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

In other Nymex trading, gasoline futures fell 5.2 cents to 98.86 cents a gallon. Heating oil dropped 6.26 cents to $1.52 a gallon while natural gas for January delivery fell 31 cents to $6.028 per 1,000 cubic feet.