The Valero St. Charles oil refinery is seen during a tour of the refinery in Norco, Louisiana August 15, 2008.  (REUTERS/Shannon Stapleton)

The Valero St. Charles oil refinery is seen during a tour of the refinery in Norco, Louisiana August 15, 2008. (REUTERS/Shannon Stapleton)

OIL prices fell below $US68 a barrel today on concerns that high unemployment in the United States, the world’s top energy consumer, will weigh on demand.

But analysts said a weak US dollar, combined with a firm equities market, would help limit oil’s decline.

US crude for October delivery fell 46 cents to $US67.56 a barrel. The contract settled 6 cents higher at $US68.02 a barrel on Friday.

London Brent crude fell 39 cents to $US66.43 a barrel.

“As the long Labor Day weekend comes to an end, we’re looking at the end of peak gasoline demand season in the US, which means we’re now entering a period of slack seasonal demand with refineries scaling back their production,” said Toby Hassall, a commodities analyst at CWA Global Markets.

“High unemployment in the US also underscores the weakness we’re seeing in the consumer sector, which will put a handbrake on the overall recovery in energy demand even as we see industrial demand recovering.”

The US Labor Department reported on Friday that the unemployment rate jumped to 9.7 per cent in August, despite fewer job losses than expected.

This week, traders will be watching for OPEC’s output policy when it meets in Vienna on Wednesday, with most analysts expecting the producer group, the source of more than a third of the world’s oil supply, to maintain its official output target to keep prices stable around $US70.

Investors will also eye the monthly release of Chinese economic data due on Friday (US time), analysts said.

US crude prices have been trading in a range between $US65 to $US75 a barrel since the start of August, with prices swinging on economic data as investors seek clues about the speed of a recovery from the recession.

Traders will also be watching a weather disturbance which is moving westward from Africa. There is a medium chance of it becoming a tropical cyclone in the next 48 hours, the US National Hurricane Center said overnight.

Crude oil speculators on the New York Mercantile Exchange reduced their net long positions in the week to Sept 1, the Commodity Futures Trading Commission said in a report on Friday. — Reuters