Crude Oil Trades Below $20for the First Time in Two Years

Oil prices traded below $20 a barrel for the first time in two years Friday as news of the biggest drop in U.S. employment in two decades reinforced fears of wilting economic demand.

Crude oil for December delivery closed 21 cents lower at $20.18 a barrel after trading as low as $19.69, the lowest level since July 1999, on the New York Mercantile Exchange.

The Labor Department said the U.S. economy shed 415,000 jobs in October, the biggest single-month drop since May 1980. The unemployment rate soared to 5.4% from 4.9% in September, a five-year high.

The dreary news has heightened trader worries about consumer demand, shrinking manufacturing demand, less travel and other petroleum demand indicators.

“The employment number underscores the weakness of the U.S. economy,” said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis, which manages $280 billion. “There will be a spillover effect to other countries, adding to the downward pressure on the economy, and this will weigh on oil demand.”

Oil product prices closed mixed. December heating oil ended 0.61 cent lower at 58.26 cents a gallon, while December gasoline settled 0.27 cent higher at 54.40 cents a gallon, bouncing off the day’s low of 52.90 cents. Lower demand in the U.S., the world’s biggest energy consumer, has helped send the Organization of Petroleum Exporting Countries’ own crude oil index to $18.25 a barrel, the lowest since July 21, 1999.

With the so-called basket price down 31% since Sept. 11, OPEC members may vote for another output quota reduction Nov. 14. OPEC has reduced its production targets three times this year, by a total of 13%, to keep inventories from mounting. But many of the cartel’s members continued last month to exceed their quotas, limiting the group’s effectiveness in keeping prices in the desired price band, analysts said. The OPEC basket has been stuck below a target range of $22 to $28 a barrel for more than a month.

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Reuters and Bloomberg News were used in compiling this report.