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Jobs data send oil prices tumbling below US$70

OIL prices tumbled yesterday as unemployment hit a 26-year high, sowing more doubts about the strength of the economic recovery and crude demand.

Benchmark crude for November delivery fell 87 cents a barrel to settle at US$69.95 on the New York Mercantile Exchange. Prices fell as low as US$68.32 earlier in the day.

Heating oil and gasoline prices also fell.

Natural gas, which fell 8 percent Thursday after the government reported consumption has dropped so low that the U.S. is now storing more than at any other time on record, added 25.2 cents to settle at US$4.718 per 1,000 cubic feet.

The unemployment rate hit 9.8 percent in September, the highest since June 1983, as employers cut a worse-than-expected 263,000 jobs.

All told, 15.1 million Americans are now out of work, the Labor Department said. And more than 7.2 million jobs have been eliminated since the recession began in December 2007.

Crude has about doubled in price since February, pulled higher in part by the hope that the economy is coming back from the worst recession since World War II, a six-month rally on Wall Street and a battered dollar.

But the jobs figure and recent reports on manufacturing show the economy is still weak. The Commerce Department yesterday said that new orders to U.S. factories fell in August by the largest amount in five months. The 0.8 percent drop was much worse than the 0.7 percent that economists expected.

At the same time, some of the stimulus from such government programs as the Cash for Clunkers auto rebate and the US$8,000 credit for new home buyers is starting to wind down.

"We're going to start to see how solid the economy is," said PFGBest analyst Phil Flynn, who believes oil prices could fall below US$60 before the end of the year.

In other Nymex trading, heating oil fell 3.06 cents to settle at US$1.7968 a gallon. Gasoline for November delivery dropped 1.7 cents to settle at US$1.7409 a gallon.

In London, Brent crude fell US$1.12 to settle at US$68.07 on the ICE Futures exchange.


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