Fin24

Oil falls on weak US jobs data

2011-06-03 16:59

London - Oil fell further on Friday as closely watched data showed US employment rose far less than expected in May, recording its weakest reading since September and casting a pall over demand prospects.

The jobless rate in the United States rose to 9.1% as high energy prices and the effects of Japan's earthquake bogged down the world top economy.

By 1329 GMT, Brent crude futures were down $1.51 to $114.03 a barrel. US crude fell $1.88 to $98.52.

"Oil's fundamentals per se are not very positive. On top of that, we have a slew of weak macro economic data. We have just had very poor payroll data from the States," Olivier Jakob with Petromatrix said.

"If you want to see oil trade up to $130 or so, the economy has to be strong."

Nonfarm payrolls increased 54 000 last month, the US Labour Department said on Friday, with private employment rising 83 000, the least amount since June. Government payrolls dropped 29 000.

Economists polled by Reuters had expected payrolls to rise 150 000 and private hiring to increase 175 000 in May. The government revised employment figures for March and April to show 39 000 fewer jobs created than previously estimated.

The United States is the second-biggest energy consumer after China. Any further economic slowdown could hit consumer spending, leading to lower fuel use.

"Growth prospects in light US product demand, be it gasoline or distillates, are not favourable," Harry Tchilinguirian, BNP Paribas' head of commodity markets strategy, said.

Yemen

Fighting in Yemen, a small oil producer in the Arabian Peninsula, was intensifying.

Shells struck Yemeni President Ali Abdullah Saleh's palace in Sanaa on Friday, wounding three senior officials, but a Yemeni official said Saleh was "well".

Jakob with Petromatrix said although the situation in Yemen was worrying, it would not change the oversupply of oil.

"We have a solid supply outage from Libya. Despite that, US crude inventories went up to the highest level in many years," he said. "It will not change the weak fundamentals."

US crude inventories rose to the highest May level since 1990.

The International Energy Agency (IEA), the advisor of 28 industrialised countries, reiterated its call for Opec to boost output to pull oil prices further lower.

"There is a need for more oil in the market, and we hope producing countries are reading the market signals in the way we are," Fatih Birol, chief economist for the IEA, told Reuters.

We are already seeing the impact of high oil prices in the US and China," he said, adding US economic data was showing slower growth rates while inflationary pressure in China was on the rise.

On Thursday, some Opec members, including the most influential, Saudi Arabia, said the group is considering raising output ahead of the group's meeting next week.

Comments
  • BernieK - 2011-06-03 22:36

    Great news! Let this artificial oil price come right down where it belongs. It does not cost that much to produce oil.

  • pages:
  • 1