Oil prices fall on weak economic outlookSaturday September 6,...

Oil prices fall on weak economic outlook
Saturday September 6, 2008, 6:45 am

Crude oil prices fell further on Friday on concerns over slowing energy demand following a dismal report on the US labour market that sparked renewed recession worries.

New York's main contract, light sweet crude for October, fell $US1.66 to close at $US106.23, capping a week in which the benchmark contract slid $US9.23.

Brent North Sea crude for delivery in October dropped $US2.21 to settle at $US104.09 a barrel.

The downward trend was fueled by news that the US jobless rate jumped to a five-year high of 6.1 per cent - a sign of recession-like conditions that will limit energy demand.

"The rapid rise in the unemployment rate points to a US recession, as such an increase has never occurred outside of one," said Peter Kretzmer, economist at Bank of America.

The decline was tempered somewhat by the slow pace of recovery of oil operations in the Gulf of Mexico after the passage of Hurricane Gustav. US officials said about 10 per cent of production had resumed after a near-total shutdown.

"Crude prices featured on the downside on persistent concerns over weakening oil demand and as the US dollar continued to appreciate," said Nimit Khamar, an analyst at the Sucden brokerage in London.

"The outlook for global economies is looking far from rosy, and is fuelling concerns over demand destruction and pushing oil prices lower.

The dollar struck a near 11-month high versus the euro on Friday on news of slumping industrial output in Germany, Europe's biggest economy, and as the market awaited key US jobs data, traders said. The dollar's swift rise was then checked when the disappointing US unemployment figures came.

A strong US currency makes dollar-priced oil more expensive for buyers holding weaker currencies, dampening demand for crude, which is already falling because of a global economic slowdown.

Some caution persisted ahead of Tuesday's meeting of the OPEC oil cartel with many market participants expecting them to reduce production.

OPEC member Libya said on Friday the oil market is starting to suffer from oversupply.

"The market is well served and has even started to suffer from oversupply," said Libya's oil minister Shukri Ghanem.

Many analysts expect oil prices to continue to fall because of fears of recession in the United States and Europe.

Crude oil, which hit a record high of $US147.27 on July 11 in New York, has lost nearly $US40 in less than two months.

Oil prices had broken through $US100 a barrel for the first time at the start of January on geopolitical concerns, notably surrounding the ongoing nuclear power dispute between the West and Iran, which is a major producer and exporter of crude oil.