Lagging Demand Puts Crude Below $40

The unemployment report bolsters how the worst recession in decades has taken hold of the U.S. economy. At the same time, crude oil continues to flood the market with traders storing oil at sea in hopes that it can be sold later should prices rise.

Oil analyst Stephen Schork notes in his daily report how weak the economy has become, especially in the auto and steel industries.

The Detroit Three automakers have announced extended holiday shutdowns. Chrysler has said it is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors (GM Quote) will temporarily close 20 factories -- many for the entire month of January -- to cut vehicle production.

Meanwhile, U.S. Steel (X Quote) is idling plants in Granite City, Ill., Keewatin, Minn., and its Great Lakes Works near Detroit.

"These two anecdotes from the auto and steel industries tell us all we need to know about how dicey the current economic situation is," he wrote.

On Friday, KB Home (KBH Quote), one of the nation's largest homebuilders, reported that lower housing revenue drove sales down 56% to $919 million in the fourth quarter from $2.07 billion in the 2007 fourth quarter. Homes delivered totaled 3,192 in the quarter, less than half the 8,132 delivered a year earlier as foreclosures mounted and mortgage lending dried up.

On Thursday, president-elect Barack Obama said the recession could "linger for years" unless Congress pumps unprecedented sums from Washington into the economy.