The price of oil has dropped below $US100 per barrel for the first time since February.
The dramatic drop - $US5 per barrel by midday on Friday - is easing fears that high energy prices would cripple a US economy that is struggling to overcome high unemployment, stagnant wages and weak growth.
The catalyst was Friday’s weaker than expected report on job growth in the US that added to recent signs that the global economy is weakening, meaning demand for oil should slow.
Earlier this year, world oil demand looked to be rising quickly at the same time that world supplies were threatened by a host of small production outages and the prospect of drastically reduced production from Iran, the world’s third biggest exporter.
Those developments raised the prospect that world supplies would be at their most tenuous just as the summer driving season in the developed world was arriving. The price of the US benchmark oil rose to $US110.
International oil spiked even higher, to $US128 per barrel. Petrol prices in the US appeared to be on track to soar past $US4 per gallon nationwide and break the 2008 record of $US4.11.
That picture has now been turned upside down. World oil supplies are growing while demand is falling. US petrol prices have fallen to $US3.80 per gallon from a peak of $US3.94 in early April. Now they could go as low as $US3.50 per gallon by July 4, according to Tom Kloza, Chief Oil Analyst at the Oil Price Information Service.
On Friday, Benchmark West Texas Intermediate crude fell $US4.83 to $US97.70 in afternoon trading on Friday. That’s a drop of 4.7 per cent.
Oil prices have been falling since Wednesday because of a renewed focus on the economy. The Labor Department said on Friday that the US economy added just 115,000 jobs in April - far fewer than the pace of hiring earlier this year. Government data show that US oil consumption dropped 5.3 per cent in the first quarter.
Meanwhile, supplies have been growing for the past six weeks and hit a 22-year high in Cushing, Oklahoma, where benchmark crude is delivered.
The European economy also is slowing down as governments on that continent struggle with oppressive debt.
‘‘We’re fearful that the economy is slowing more than we originally thought,’’ PFGBest analyst Phil Flynn said.
US oil prices haven’t dropped this much since December 14, 2011, when the benchmark price fell by $US5.19, or 5.2 per cent, to $US94.95 per barrel.
The price of the US benchmark crude has crossed the $US100 mark 21 times during the past year. It rose as high as $US109.77 on February 24 this year. Last year it rose to $US113.93 per barrel April and fell as low as $US75.67 per barrel on October 4.
Brent crude, which is used to set the price of oil imported into the US, lost $US1.98 to $US114.10 per barrel.