Energy prices dropped Thursday as dismal job news, a sinking stock market and a lower-than-expected draw on natural gas supplies dimmed hopes for stronger energy demand.
Benchmark oil for March delivery fell $4.31 to $72.67 a barrel on the New York Mercantile Exchange. Earlier, crude went as low as $71.47. In London, Brent crude for March delivery shed $4.27 at $71.65 a barrel on the ICE Futures exchange.
Natural gas prices lost 3.4 cents to $5.385 per 1,000 cubic feet, after the Energy Information Administration said that the country's glut of natural gas only dropped by 115 billion cubic feet. Analysts expected it to shrink much more.
The recession slowed demand for natural gas to heat homes, and to run power plants and factories. As a result, the nation is sitting on a massive supply of gas. The government said stocks are brimming at 2.41 trillion cubic feet, well above the five-year average for this season.
Meanwhile, the Labor Department reported an unexpected uptick in jobless claims, raising more concern about the economy and when it might get back on track. It was the fourth increase in the past five weeks.
Fadel Gheit, an oil analyst at Oppenheimer & Co., said the discouraging jobs news puts a damper on hopes for a near-term economic recovery.
"When people say there's a light at the end of the tunnel, it's getting to be a very dim light and a very long tunnel," he said.
Consumers are pressed between rising unemployment and energy prices higher than a year ago. At the pump, drivers are paying $2.659 per gallon, well above the $1.90 they paid on average at this time last year, according to AAA, Wright Express and the Oil Price Information Service.
Weak demand has lowered pump prices recently. Prices are down 3.1 cents from a week ago and barely a penny from a month ago.
PFGBest analyst Phil Flynn said consumers should get more relief in their energy bills in the near future.
"I think we're on the verge of sharply lower prices," he said, predicting a fall of 5 to 10 cents in gasoline prices in the next three months.
Investor worries about the economy pushed the stock market lower on Thursday. The Dow Jones industrial average fell about 230 points in afternoon trading. The dollar climbed against the Euro for the second day in a row as bleak economic news and slumping commodity prices sent investors to the safer haven of the U.S. greenback.
In other Nymex trading in March contracts, heating oil fell 9.55 cents to $1.9239 a gallon, while gasoline dropped 9.85 cents to $1.9377 a gallon.
Associated Press writer Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
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