Oil Prices Slammed by Recession Fears

NEW YORK ( TheStreet) -- Oil prices were punished on fears of another global recession in the wake of Friday's disillusioning jobs number and no signs yet a consensus solution to the European debt crisis.

Brent crude oil futures for October delivery were dropping $2.68 to $111.61 a barrel and West Texas Intermediate light sweet crude oil for October delivery were diving $3.45 to $85.48 a barrel.

American employers kept their payrolls steady in August, falling short of the 70,000-job increase economists had expected.

Employers also added fewer positions in June and July than previously thought, the Labor Department said.

About 85,000 workers were added in July, instead of 117,000. The unemployment rate was unchanged at 9.1% in August, as expected by economists surveyed by Thomson Reuters.

That said, the U.S. oil and gas industry added 1,700 workers between July and August as major oil companies continue to appear to be a pocket of strength for the still moribund jobs market.

Worries over the European debt crisis deepened this week, as the region's leaders are still unable to come up with a unanimous solution to the region's problems. Italy has reportedly scrapped the pension plan portion of its austerity measures, while regional infighting threatens to derail the second bailout package for Greece.

There are growing concerns that Greece won't be able to meet its budget deficit targets.

"We had a big time overnight selloff on a slew of fear over the upcoming jobs reports," said PFG Best senior energy analyst Phil Flynn. "Weakening manufacturing globally as well as renewed European concerns and the Fed asking for plans from Bank of America and investigations of Goldman Sachs is overshadowing the shutdown of oil and gas production down in the Gulf of Mexico."

"Worries about the economy are overcoming fears about the loss of production from what is now being called 'Tropical Depression 13.'"

October natural gas futures were falling 5 cents to $4.005 per million British thermal units on thin trading volume ahead of the Labor Day holiday weekend and expectations of cooler temperatures in the Midwest in days following the weekend.

Energy stocks were trading in negative territory. EOG Resources ( EOG) was falling 1.8% to $89.81; Gulfport Energy ( GPOR) was losing 2.4% to $28.55; Newfield Exploration ( NFX) was tumbling 3% to $48.65; Hess ( HES) was giving up 2.5% to $58.32; Cheniere Energy ( LNG) was tumbling 3% to $7.36; Chevron ( CVX) was lower by 2.2% to $96.34; and Suncor Energy ( SU) was down 3.6% to $30.69.

-- Written by Andrea Tse in New York.

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