Next Target for Crude: $50

Nymex light sweet crude oil futures on Friday fell to a fresh 21-month low of $59.97 a barrel, basis the nearby December contract, amid a global economic slowdown that has significantly reduced demand prospects for energy, including crude oil.

Reduced energy demand notions were bolstered Friday morning when the monthly U.S. employment report from the Labor Department showed U.S. nonfarm payroll fell by 240,000 in October, the 10th straight monthly decline. The markets were expecting a decline of about 200,000 jobs. The U.S. unemployment rate rose 0.4 percentage points to 6.5%, the highest rate in 14 years. Most analysts and economists expect a continued deterioration in the jobs picture -- and in the overall U.S. economy -- well into 2009.

Weakening worldwide economies have driven crude oil prices sharply lower the last four months. Crude oil futures prices have lost more than half their value since scoring a record high above $147 a barrel in early July.

The liquid energy markets have all but ignored a directive from the Organization of Petroleum Exporting Countries (OPEC) to reduce the cartel's output by 1.5 million barrels a day, and instead focused on the demand side of the equation. OPEC produces around 40% of the world's crude oil. Indeed, veteran traders know the bears are commanding price action in the crude oil market when OPEC members start to cut crude oil output. (History shows that OPEC reductions in member-country crude oil production quotas have a spotty record of success at best.)

Given the specter of a worldwide economic recession and the negative impact on oil prices, crude oil futures traders have taken their cues from the U.S. stock market recently. Big down days in the stock market late this week produced a decline of about $10 a barrel in December crude oil, from Tuesday's high of $71.77.

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Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlogs.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.