Oil fell towards $42 a barrel today, sinking to its lowest level since January 2005, after a US government report showed more than half a million Americans lost their jobs last month.
US employers axed payrolls by a shocking 533,000 in November for the weakest performance in 34 years, government data showed.
US light crude plunged to $42.05 a barrel after the figures were released and by 13.46pm was trading at $42.36, down $1.31. London Brent crude was off $1.20 at $41.08.
Many dealers and analysts expect oil to test the psychologically important $40 a barrel level fairly soon as evidence mounts of a significant decline in oil demand in all the major developed economies.
US and European companies announced further job cuts yesterday, with US phone company AT&T saying it would eliminate 12,000 jobs, while chemical maker DuPont planned to drop 2,500.
Leading US retailers also reported dismal November sales yesterday. Totting up the results, the International Council of Shopping Centers said sales fell by a record 2.7 per cent compared to the same period last year.
To try and ginger up their feeble economies, European central banks cut interest rates yesterday. Sweden's central bank cut by a record 175 basis points, the European Central Bank cut by 75 points and the Bank of England cut by 100 points.
The price fall to nearly four-year lows has prompted Opec members to call for increasingly strong action when the Organisation of the Petroleum Exporting Countries meets next, on December 17th in Algeria.
Opec President Chakib Khelil told Algerian state television yesterday that the oil-producing group should cut oil output by a significant amount at the meeting if prices remain at their current level.
But analysts say another Opec cut, the third since September, would need to be drastic to provoke a price reaction.
"Cumulatively, Opec is behind the curve by 4-5 million barrels per day (bpd). They really need to cut by 2.5 to 3 million barrels to have any impact on prices at the next meeting. Less than 1.5 million will mean another sell off," Edward Meir, commodities analyst at MF Global said.
Reuters