Oil slides below $70 as traders eye US economy

[October 02, 2009]  WASHINGTON (AP) -- Oil prices slid below $70 a barrel Friday as signs of a sluggish U.S. economic recovery discouraged stock and crude investors.

By midday in Europe, benchmark crude for November deliver was down 95 cents at $69.87 in electronic trading on the New York Mercantile Exchange. The contract added 21 cents to settle at $70.82 on Thursday.

Crude has hovered around $70 for months amid mixed signals about the strength of the U.S. economic recovery. On Thursday, poor economic data sparked a sell-off in U.S. stock markets.

The Labor Department said new claims for jobless benefits rose last week to 551,000, more than analysts expected. And the Institute for Supply Management said its index of manufacturing activity in September fell when analysts had expected an increase.

The Dow Jones industrial average fell 2.1 percent Thursday, triggering a sell-off in Asia. Japan's Nikkei 225 stock average closed Friday down 2.5 percent and Hong Kong's Hang Seng lost 2.8 percent. Stocks were also lower in Europe, with London's FTSE 100 and Germany DAX both down 0.7 percent and the CAC 40 in Paris off by 1.2 percent.

"At $70 a barrel, investors have priced in a fairly sharp economic recovery," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "That makes it vulnerable to bad economic news."

Investors will be closely analyzing the government's monthly jobs report, which is scheduled to be released later on Friday.

Economists expect America's jobless rate to rise slightly to 9.8 percent, from 9.7 percent in August, while employers are forecast to have cut 180,000 jobs, which would be the fewest since August 2008.

"If job losses exceed 200,000, prospects for strong second half GDP growth will dim significantly," said Peter Morici, a former chief economist at the U.S. International Trade Commission.

In other Nymex trading, heating oil fell 2.33 cents to $1.8041 a gallon. Gasoline for November delivery dropped 2.49 cents to $1.7330 a gallon. Natural gas for November delivery gained 1.5 cents to $4.481 per 1,000 cubic feet.

In London, Brent crude fell 89 cents to $68.30 on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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