Oil steady after US unemployment rate falls

AP News
Posted: Dec 02, 2011 4:33 PM
Oil steady after US unemployment rate falls

Oil prices rose more than 4 percent this week after a series of developments suggested that higher oil demand and tighter global supplies lay ahead.

If oil keeps rising, it could drive retail gasoline prices higher. But most analysts don't expect pump prices to go up for at least several weeks. The national average fell almost 3 cents this week to $3.286 per gallon on Friday.

Benchmark crude rose 76 cents on Friday to finish the week at $100.96 per barrel in New York. Prices climbed almost every day after ending at $96.77 a barrel a week ago.

Brent crude rose 97 cents to finish at $109.68 a barrel in London.

Prices jumped early Friday after the government reported that the unemployment rate dropped last month to 8.6 percent _ the lowest level since March 2009. Oil and gasoline demand has been tumbling in the U.S. It should rise as businesses ramp up and more people return to work.

Friday's jobs report added to other encouraging news this week about the U.S. economy. Manufacturing activity in November shot up to a seven-month high, auto makers reported big sales increases, shoppers boosted Black Friday sales for retailers and the Fed said the economy was expanding in most parts of the country.

The Federal Reserve and the central banks of other countries increased the flow of dollars to foreign banks to boost lending around the world. The move forced the dollar lower versus other major currencies, and that tends to push oil prices higher. Oil, which is priced in dollars, usually rises in value as the dollar falls and makes crude cheaper for investors holding foreign money.

Meanwhile, tensions increased this week over Iran's nuclear program. Iran is suspected of developing nuclear weapons and Western nations are considering sanctions against the oil-rich nation. Angered at possible sanctions, Iranian protesters attacked the British embassy in Teheran on Tuesday. Britain pulled its diplomatic staff from the country and told Iranian diplomats to get out of Britain. Germany, France and the Netherlands also recalled their ambassadors.

The U.S. Senate voted on Friday to impose new sanctions on Iran's central bank, barring foreign financial institutions that do business with the bank from opening operations in the U.S.

Iran is the world's third-biggest oil exporter, shipping 2.2 million barrels of crude per day. An oil embargo against the country could disrupt the flow of crude and further tighten world supplies, although analysts view a widespread embargo as unlikely. China is Iran's biggest oil customer, taking about 20 percent of its exports, followed by Japan and India. European Union nations get about 18 percent of Iran's exports.

Traders also remain cautious about Europe, as it continues to struggle with massive debts that threaten to push the region into recession. A critical European Union summit in Brussels next week will deal with tougher rules for keeping national budgets under control.

And despite the promising economic data in the U.S., energy demand remains weak. Government data this week showed that gasoline consumption in November was at its lowest level since January 2004.

In other energy trading on Friday, heating oil rose 2.05 cents to end at $2.99 per gallon, while gasoline futures rose by 5.83 cents to finish at $2.6162 per gallon. Natural gas fell by 6.4 cents to end at $3.584 per 1,000 cubic feet.