Oil falls over 2 percent on weak US jobs report

AP News
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Posted: Jul 08, 2011 3:22 PM
Oil falls over 2 percent on weak US jobs report

Oil tumbled more than 2 percent Friday, giving up most of its gains for the week after the latest government data showed hiring in the U.S. is at a virtual standstill.

The Labor Department said that employers added the fewest jobs in nine months and the unemployment rate rose to 9.2 percent in June. A slowdown in hiring means that gasoline demand could remain stagnant as fewer workers join the daily commute, and consumers limit driving and trips to the gas station as they watch their spending.

Benchmark West Texas Intermediate crude for August delivery gave up $2.47, or 2.5 percent, to settle at $96.20 per barrel on the New York Mercantile Exchange. WTI started the week around $95 a barrel and rose as high as $99.42 during trading on Thursday.

In London, Brent crude lost 26 cents to settle at $118.33 per barrel on the ICE Futures exchange.

Gasoline futures also dropped following the jobs report. The contract for August delivery gave up 3.44 cents to settle at $3.0926 per gallon on the Nymex.

Gas pump prices rose again on Friday, reaching a national average $3.594 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is up 4.4 cents from a week ago. It's still about 39 cents below the three-year high reached in early May. A year ago drivers paid 87.7 cents per gallon less, on average.

Tom Kloza, chief oil analyst for the Oil Price Information Service, is sticking with his summer gasoline forecast for a national average between $3.25 and $3.75 per gallon. He noted that oil is traded around the world, and demand is expected to expand despite sluggish jobs growth in the U.S. While the U.S. is the world's largest petroleum consumer, demand growth will be driven by motorists, trucking companies and factories in China and India, he said.

Sluggish U.S. gasoline demand may delay Brent crude reaching $125 per barrel next year, as forecast by Goldman Sachs. "But it's not going to lead to any major selling" of oil contracts, Kloza said. Brent is used by many East Coast refineries to produce gasoline.

Oil trader and analyst Stephen Schork has a slightly different take on the jobs report. Schork uses it and other reliable data about the U.S. economy to get an early read on China and other emerging economies that are not as forthcoming with information. If the U.S. keeps struggling, he thinks it's only a matter of time before every economy has problems.

"If the U.S. and the E.U. are having difficulty with fuel prices at these levels, I have to imagine that the Chinese are too," Schork said.

In other Nymex trading for August contracts, heating oil lost less than a penny to settle at $3.0964 per gallon and natural gas gained 6.6 cents to settle at $4.204 per 1,000 cubic feet.