COLUMBUS, Ohio – Oil prices fell Thursday to levels last seen nearly four years ago as the number of people continuing to receive government aid reached a 26-year high, factory orders hit an eight-year low and major corporations slashed jobs.
Light sweet crude fell 95 cents to $45.84 on the New York Mercantile Exchange after tumbling close to $45. The last time crude traded that low was in February 2005 when oil hit $44.60 per barrel.
Also hitting new lows were average retail gasoline prices, which fell below $1.80 nationally for the first time since January 2005.
The massive pullback in consumer spending, especially on gasoline and other fuels, has left analysts stunned.
Just four months ago, crude rocketed close to $150 and the average gallon of gasoline went for more than $4 per gallon.
No one believed crude would give up $100 by December, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
"I think the traders are looking at that and they're saying, 'Well, December is OK, it's relatively balanced here and there, but my goodness all of these layoffs after Christmas, the cold weather, the cocooning, the bills coming due after Christmas, January is just going to be awful,'" Kloza said.
Dour economic reports continue to spill out during a week when the National Bureau of Economic Research said the economy fell into a recession in December 2007.
"It is the overall slowing of the economy that is pressuring oil," said Phil Flynn, an analyst at Alaron Trading Corp. "People are waking up to the fact that there may not be much demand."
The government said the number of people continuing to claim unemployment benefits last week reached 4.09 million, the highest level since December 1982, when the economy was emerging from a recession.
Factory orders plunged a bigger-than-expected 5.1 percent in October caused by big cutbacks in demand for steel, autos, computers and heavy machinery. It was the largest decrease since an 8.5 percent fall in July 2000.
The Labor Department reported that initial claims for unemployment insurance dropped to a seasonally adjusted 509,000, from an upwardly revised figure of 530,000 for the previous week. That was significantly below analysts' estimates of 537,000, according to a survey by Thomson Reuters.
The four-week average of initial claims, which smooths out fluctuations, increased to 524,500, also the highest level since December 1982, the department said.
The U.S. work force is roughly 50 percent larger than it was in the early 1980s. As a result, the department said the proportion of workers continuing to receive jobless benefits matches a level reached 16 years ago, in September 1992, when the economy was slowly recovering from recession.
There were signs that the economic environment is worsening.
On Thursday AT&T said it was slashing 12,000 jobs, or about 4 percent of its work force. Chemicals company DuPont said it will cut 2,500 jobs and media conglomerate Viacom Inc. said it will eliminate about 850 jobs.
Many retailers posted weak sales for November, despite a shopping boost the day after Thanksgiving. Results from Wal-Mart Stores Inc. beat Wall Street estimates and the world's largest retailer predicted that sales for established stores for the current month should be at the high end of estimates. However, Costco Wholesale Corp., usually a strong performer, reported a bigger-than expected sales decline. And mall-based stores such as teen stalwart Abercrombie & Fitch Co., Kohl's Corp. and Macy's Inc. fared much worse, reporting percentage declines of over 10 percent.
Oil prices fell even after central banks in Europe and elsewhere slashed interest rates in an effort to spark their economies. The European Central Bank lowered its rate to 2.5 percent from 3.25 percent, and the Bank of England, Sweden's Riksbank and New Zealand's central bank also cut rate.
Prices at the pump continued to decline, falling 1.4 cents overnight to $1.789, according to auto club AAA, the Oil Price Information Service and Wright Express. That price is down 60.2 cents from a month ago and $1.255 from a year ago.
The lower prices may be starting to boost demand for gasoline. While sales have remained below levels of a year ago, the gap has narrowed in recent weeks.
Still, Flynn does not see enough demand to justify big increases in oil and gas prices.
"We have entered a new era of lower gasoline prices and oil prices," he said.
The government said natural gas storage levels in the U.S. tumbled last week, but remain 2.1 percent above the five-year average for this time of year.
The Energy Department's Energy Information Administration said in its weekly report that natural-gas inventories held in underground storage in the lower 48 states fell by 64 billion cubic feet to about 3.36 trillion cubic feet for the week ended Nov. 28.
Analysts had expected a drop of between 61 billion and 66 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
In other Nymex trading, gasoline futures fell 1.8 cents to $1.02 a gallon. Heating oil dropped 1.57 cents to $1.57 a gallon while natural gas for January delivery fell 28 cents to $6.066 per 1,000 cubic feet.
In London, January Brent crude fell 93 cents to $44.51 on the ICE Futures exchange.