Sept. 5 (Bloomberg) -- Crude oil fell to a five-month low as the dollar climbed and U.S. unemployment rose more than expected, signaling a slowdown in demand.

Oil declined 8 percent this week, the most since July, as the dollar rose to the highest this year against the euro. Payrolls fell in the U.S., the world's biggest energy-consuming country, the Labor Department said today. U.S. fuel demand during the past four weeks was down 3.5 percent from a year ago, the Energy Department said yesterday.

``Demand destruction and the strength of the dollar are tailor-made to send oil prices lower,'' said Daniel Flynn, a broker with Alaron Trading Corp. in Chicago. ``If it weren't for the active hurricane season, prices would be below $100.''

Crude oil for October delivery fell $1.66, or 1.5 percent, to settle at $106.23 a barrel at 2:46 p.m. on the New York Mercantile Exchange, the lowest close since April 4. Oil has dropped six straight days, the longest stretch since April 30, 2007, through May 7, 2007. Prices are 41 percent higher than a year ago.

Gasoline for October delivery dropped 5.43 cents, or 2 percent, to $2.6861 a gallon in New York, the lowest settlement price since April 1. Heating oil declined 4.09 cents, or 1.4 percent, to settle at $2.9828 a gallon, the lowest since April 3.

Investors looking to hedge against the dollar's decline earlier this year helped lead crude oil, gold, corn and gasoline to records. The situation reversed over the past month as the dollar rallied against the euro.

The dollar traded at $1.4241 against the euro, compared with $1.4325 yesterday. It touched $1.4196 earlier, the strongest since Oct. 24.

OPEC Meeting

The Organization of Petroleum Exporting Countries, the supplier of 40 percent of the world's oil, will meet to discuss production and prices on Sept. 9 in Vienna. Venezuela and Iran have made calls to trim supply because prices have dropped 28 percent from the record $147.27 reached July 11.

``I think there's a chance that next week could be very interesting because of the OPEC meeting,'' said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. ``It doesn't look like OPEC will cut quotas, but they are likely to try to boost prices with rhetoric.''

Saudi Arabia, the world's largest oil producer and OPEC's most influential member, hasn't said what its position on production will be at the meeting. The desert kingdom decided to unilaterally raise output by 500,000 barrels a day during June and July to curb the rise in oil prices.

The Linch-pin

``Where Saudi Arabia is in this debate is crucially important--that is your linch-pin,'' Jan Stuart, oil economist at UBS Securities LLC in New York said in a radio interview. Saudi King Abdullah ``is on record saying $100 is too high, but that was a little while ago. We don't know what the Saudis are ready to defend and we do know the Saudis are the ones that would have to do most of the production cutting.''

Hurricane Ike, located about 425 miles (683 kilometers) north of the Leeward Islands, has maximum sustained winds of 120 miles per hour, making it a Category 3 storm, the U.S. National Hurricane Center said. The hurricane may enter the Gulf of Mexico by the middle of next week, according to the center.

`Wild Card'

``The dollar, weather and OPEC will be the keys to the trade next week,'' Edmonds said. ``Ike is a wild card.''

The Louisiana Offshore Oil Port, the biggest U.S. oil-import terminal, said it resumed offloading of oil tankers at 2:18 a.m. Central time today. The offshore terminal was shut at 10 a.m. Aug. 30, and LOOP stopped shipments from its onshore operations Aug. 31 because of the approach of Gustav.

Royal Dutch Shell Plc, the largest oil producer in the Gulf of Mexico, reported ``light to moderate'' damage to equipment at three fields because of Gustav.

``The bias has to be for prices moving lower because the industry is recovering quickly from Gustav,'' said Tom Bentz, a broker at BNP Paribas in New York.

Continental Airlines Inc. said it will charge some coach customers $15 for the first checked bag to help counter elevated fuel costs. The move adds to the number of fees and price increases carriers are tacking on to cover a 49 percent jump in the cost of jet fuel, the industry's largest expense, during the past year.

Brent crude oil for October settlement fell $2.21, or 2.1 percent, to $104.09 a barrel on London's ICE Futures Europe exchange, the lowest settlement since April 3. Brent has dropped seven straight days for the first time since December 2006.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: September 5, 2008 15:43 EDT