Oil dropped 9 percent on Wednesday as another round of gloomy economic data showed the United States has fallen deeper into recession. US crude settled at $35.35, down $3.63 or 9.31 percent. London Brent crude settled at $36.61 a barrel, down $3.75. The losses came after government data showing US jobless claims rose to a 26-year high and consumers cut spending for the fifth consecutive month in November.
Nearly 2 million US workers have lost their jobs this year, driving the unemployment rate up to 6.7 percent and slowing consumer spending as incomes shrank. The negative economic news reinforced expectations of a continued slowdown in energy consumption. "Until the price is low enough to break through the cloud of economic gloom and doom, oil is going to be under some pressure," said Mike Fitzpatrick, vice president at MF Global in New York.
Oil prices have dropped about $110 a barrel since July as a global financial crisis has cut consumer and business demand for fuels, raising alarm bells for Opec producers that have slashed 5 percent of global oil production to stem the slide.
The dismal economic data outlook overshadowed a US Energy Information Administration report on Wednesday showing that US crude inventories dropped 3.1 million barrels last week as imports slowed, countering expectations of a 400,000 barrel rise.
Gasoline stockpiles, meanwhile, rose by 3.3 million barrels, exceeding the build of 500,000 barrels predicted by analysts. Distillates, including heating oil, rose by 1.8 million barrels versus expectations for a 200,000 barrel increase.
"Although this market could scoop up some modest support off of the 3.1 million barrel draw in total crude stocks, the data looks bearish from our perspective given the larger-than-expected increases in (refined fuel) supplies," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois. Record inventories of crude at the NYMEX delivery point in Cushing, Oklahoma, also may have encouraged selling, analysts said.
Demand, which has deteriorated during a worldwide economic downturn, sank again. Distillate consumption slipped 5.1 percent over the past four weeks compared with the same period a year ago and gasoline demand fell by 2.7 percent. The Organisation of the Petroleum Exporting Countries (Opec) already has announced cuts of around 5 percent in global oil supplies and may call an emergency meeting before March if prices extend their slide, Opec's President Chakib Khelil said on Tuesday.
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