July 2 (Bloomberg) -- Crude oil fell to a one-month low and gasoline tumbled on a report showing the U.S. unemployment rate rose last month, a signal that fuel demand in the world’s largest energy-consuming country will be slow to rebound.

Oil dropped 3.7 percent after the Labor Department said that employers cut 467,000 jobs in June. The jobless rate jumped to 9.5 percent, the highest since 1983, from 9.4 percent. U.S. fuel supplies rose last week by more than analysts forecast as consumption lagged behind year earlier levels.

“The employment numbers show that the economy is still in distress,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “We are trading on the market fundamentals as we approach the holiday weekend, and they point to lower prices.”

Crude oil for August delivery declined $2.58 to $66.73 a barrel at 2:50 p.m. on the New York Mercantile Exchange, the lowest settlement since June 3. Prices, which fell 3.5 percent this week, have increased 50 percent this year.

There will be no floor trading in New York tomorrow because of the U.S. Independence Day holiday. All electronic trading will be counted as part of the session on July 6.

Gasoline for August delivery declined 6.82 cents, or 3.7 percent, to end the session at $1.7908 a gallon in New York. It was the lowest settlement since May 18.

Pump Prices

Pump prices fell along with futures. Regular gasoline, averaged nationwide, slipped 0.1 cent to $2.629 a gallon, AAA, the nation’s biggest motoring organization, said today on its Web site. Prices have dropped 6.4 cents in 10 days.

June’s employment decline was more than forecast and followed a 322,000 decrease in May. Payrolls were estimated to fall 365,000 after a 345,000 drop initially reported for May, based on the median of 79 economists surveyed by Bloomberg News.

“The big driver was the unemployment and jobs report that came out today,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The optimism that things are going to get better quicker may have been misplaced.”

The average work week fell to 33 hours, the lowest level since records began in 1964, from 33.1 hours in May, the Labor Department’s report showed.

Oil also declined as U.S. equities dropped and the U.S. dollar climbed against the euro. The Standard & Poor’s 500 Index tumbled 2.3 percent to 902.47, extending its slump since June 12 to 4.6 percent and erasing its 2009 gain.

A rising dollar makes raw materials such as oil and gold less attractive to investors. The currency gained 0.8 percent to $1.4026 versus the euro.

Commodities Fall

Declining crude oil and gasoline prices helped send the Reuters/Jefferies CRB Index of 19 raw materials lower. The index dropped 2.1 percent to 245.86, the lowest since May 26.

Kuwaiti Oil Minister Sheikh Ahmed al-Sabah said oil prices above $100 would weaken the global economy. There is an oversupply of oil in the market and if the situation continues, OPEC will “definitely” not increase output in the group’s next meeting on Sept. 9, he told reporters in Kuwait City today.

“Hopefully in the third and fourth quarter it won’t surpass the $100 mark because this will fuel recession again,” Sheikh Ahmed said today.

The Organization of Petroleum Exporting Countries, in a meeting May 28 in Vienna, decided against cutting production targets because of concern higher prices might harm an ailing global economy. The group increased output for a third month in June, a Bloomberg News survey showed. Members pumped an average 28.23 million barrels a day last month, up 55,000 from May.

Brent crude oil for August settlement declined $2.14, or 3.1 percent, to $66.65 a barrel on London’s ICE Futures Europe exchange.

U.S. Inventories

U.S. gasoline stockpiles increased 2.33 million barrels to 211.2 million in the week ended June 26, the Energy Department said in a report yesterday. Inventories of distillate fuel, a category that includes diesel and heating oil, climbed 2.9 million barrels to 155 million, the highest since 1987.

Total U.S. daily fuel demand in the four weeks ended June 26 was down 5.8 percent from a year earlier, the Energy Department said. Distillate-fuel demand over the period fell 9.4 percent to 3.4 million barrels a day.

Crude oil inventories fell 3.66 million barrels to 350.2 million, the report showed. Supplies last week were 8 percent higher than the five-year average for the period, according to the department.

U.S. oil rigs rose by 10, or 4.6 percent, to 229 this week, the third straight increase, according to data published by Baker Hughes Inc. The count is down from a peak of 442 on Nov. 7. The figure was released a day early because of the U.S. holiday tomorrow.

Crude oil volume in electronic trading on the Nymex was 390,754 contracts as of 3:15 p.m. in New York. Volume totaled 530,776 contracts yesterday, 6.4 percent higher than the average over the past three months. Open interest was 1.16 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

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

Last Updated: July 2, 2009 15:56 EDT