Crude prices follow world markets downward

NEW YORK — A global sell off on equity markets dragged down crude prices by 3 percent Thursday, the first decline this week.

The price for a barrel of crude dropped by more than $1 immediately when U.S. markets opened, with the Dow Jones industrials giving up 130 points. Markets in Asia and Europe fell early in the day.

Also pushing oil prices lower was a strengthening dollar. Crude prices have risen steadily this year as the dollar lost value against the euro. Because oil is bought and sold largely in dollars, someone holding euros can essentially by more crude for less.

Since the beginning of February, the dollar has lost more than 16 percent of its value against the euro. The dollar gained one cent against the euro Thursday which created less of an incentive to buy crude.

Benchmark crude for December delivery gave up $2.35 to $77.23 a barrel with one day remaining for the contract on the New York Mercantile Exchange. Most of the trading already moved to the January contract, which lost $2.30 to $77.80.

Still, with oil near $80 per barrel, consumers are starting to feel the pinch. Refiners must buy crude at higher prices even though demand for jet fuel and gasoline is weak. So they have cut operating rates to below 80 percent. That is more in line with operations after a hurricane hits refiners on the Gulf Coast.

"We're now getting to an area where this is causing everyone a lot of pain," analyst Stephen Schork said. "Oil companies can't make money right now. And the consumer, who is already saddled in debt, is dealing with higher prices."

At the pump, retail gas prices ticked higher overnight to a new national average of $2.638 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 6.1 cents more expensive than last month, and 59.1 cents more expensive than the same time last year, when prices were in free fall because of the economic crisis.

Most experts see a slow recovery in energy demand, which has only raised more questions about the rapid rise in the price of oil and gasoline this year.

The Paris-based Organization for Economic Cooperation and Development said the jobless rate likely would peak in the first half of 2010 in the United States, while unemployment in the countries using the euro could start to fall only in 2011.

"The recovery is tepid because economic activity is being held back by households and businesses repairing their finances and reducing their debts," the OECD said.

In other Nymex trading, heating oil fell 3.22 cents to $2.0164 a gallon. Gasoline for December delivery fell 5 cents to $1.9614 a gallon. Natural gas for December delivery added 2.4 cents to $4.278 per 1,000 cubic feet.

In London, Brent crude for January delivery dropped $2.29 to $77.18 on the ICE Futures exchange.

Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.