Crude steady after 2 days of sharp drops

[November 08, 2008]  COLUMBUS, Ohio (AP) -- Oil prices were sedentary Friday after this week's giant sell-off, despite a government report showing the unemployment rate hit a 14-year high last month and predictions from an international energy agency that put the price of crude at $200 per barrel by 2030.

Light, sweet crude for December delivery rose 27 cents to settle at $61.04 a barrel on the New York Mercantile Exchange. But the contract dropped below $60 in overnight electronic trading for the first time 19 months.

The U.S. Labor Department said Friday that the country's unemployment rate hit 6.5 percent in October as another 240,000 jobs were cut, matching the worst jobless rate since March 1994. So far this year, a staggering 1.2 million jobs in the U.S. have disappeared.

The job losses are yet another sign that the country is in a recession and that consumers and businesses will cut back on energy use.

Most industry experts, however, believe that the decline in crude prices will not last.

The International Energy Agency on Friday nearly doubled its forecast for the price of oil over the next 20 years, citing rising demand in the developing world as well as surging costs of production.

According to a summary of its World Energy Outlook, the IEA hiked its forecast for the price of a barrel of oil in 2030 to just over $200 in nominal terms, compared with its forecast last year of $108 a barrel. Measured in constant dollars, the IEA forecasts oil at $120 a barrel in 2030, up from last year's forecast of $62.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said neither number had much influence on traders Friday.

"That jobs report was definitely lousy, but yesterday's decline in the (crude) market baked that bad number into yesterday's trade," he said.

On Thursday, benchmark crude prices fell 7 percent for the second time in as many days.

As far as the IEA number, "they are looking out to 2030 and oil traders are focused on the next couple of hours," Ritterbusch said.

Given that a barrel of crude cost $147 over the summer, $200 is not hard to fathom, he said.

Declining crude prices are a rare bright spot for most consumers.

Prices at the pump fell 2.6 cents to $2.314, down $1.13 in the past month, according to according to auto club AAA, the Oil Price Information Service and Wright Express.

Also supporting oil prices was a weaker dollar, which rallied on Thursday following a series of interest-rate cuts in Europe.

Commodities such as oil are used as a hedge against inflation and a weak dollar. When a central bank cuts interest rates, it tends to weaken that nation's currency. While that helped the dollar against European currencies Thursday, the dollar fell back down Friday.

The euro gained to $1.2765 on Friday from 1.2681 on Thursday while the British pound was also higher at $1.5787 from $1.5753 in the previous session.

On Friday the IMF made a negative revision to its forecast for the world economy, saying it was now expected to grow at a 2.2 percent pace in 2009, down from its projection last month of 3 percent.

The U.S. economy will shrink by 0.7 percent, down from last month's forecast that it would grow by 0.1 percent. The economic growth of the 15 countries that use the euro will fall by 0.5 percent, down from last month's projection of 0.2 percent growth, the IMF said.

The slowing economy has trimmed energy use from the U.S. to Asia.

Ritterbusch said he can see oil going down further to $50 or $55 a barrel before starting to increase over the winter and gas prices may fall nationally to $2 a gallon over the next month.

In London, December Brent crude fell 8 cents to $57.08 on the ICE Futures exchange.

In other Nymex trading, gasoline futures rose a penny to $1.3495 a gallon. Heating oil gained 3.6 cents to $1.9784 a gallon while natural gas for December delivery fell 22 cents to $6.757 per 1,000 cubic feet.

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Associated Press writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore and Jeannine Aversa in Washington, D.C., contributed to this report.

[Associated Press; By MARK WILLIAMS]

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