Crude Falls as U.S. Jobs Report Raises Concern Economic Growth Is Slowing

Crude oil fell for a third day as weaker-than-forecast growth in U.S. company payrolls bolstered concern that economic growth in the world’s biggest oil- consuming country is slowing.

Oil slipped 1.6 percent after the Labor Department said private payrolls that exclude government agencies rose by 71,000, less than forecast, after a gain of 31,000 in June that was smaller than previously reported. A report on Aug. 4 showed that U.S. fuel supplies increased last week as demand dropped.

“The fundamental news today is that the U.S. economy isn’t creating enough jobs,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “There’s no indication that this situation will change anytime soon. There were already doubts about demand, and inventories remain elevated.”

Crude oil for September delivery fell $1.31 to settle at $80.70 a barrel on the New York Mercantile Exchange, the biggest decline since July 27. Futures rose 2.2 percent this week.

Brent crude oil for September settlement declined $1.45, or 1.8 percent, to end the session at $80.16 a barrel on the London-based ICE Futures Europe exchange.

Economists projected a 90,000 rise in private jobs, according to the median estimate in a Bloomberg News survey. Overall employment fell 131,000 and the jobless rate held at 9.5 percent, according to the department.

“We’re losing jobs, not adding them,” said Michael Fitzpatrick, vice president of energy at MF Global in New York. “This is hardly a signal that energy demand will be vibrant in coming months.”

Revised Employment Data

Total employment fell a revised 221,000 in June, today’s figures showed. Payroll estimates in the Bloomberg survey of 84 economists ranged from a decline of 160,000 to a gain of 10,000 after a previously reported loss of 125,000 jobs in June that was led by census dismissals.

“There was a significant downward revision in the June jobs number and a decline in total jobs last month,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “It’s clear that the U.S. road to recovery will be long.”

Equities also declined on the employment numbers. The Standard & Poor’s 500 Index fell 0.4 percent to 1,121.64, and the Dow Jones Industrial Average slipped 0.2 percent to 10,653.56.

Fuel Demand

U.S. fuel consumption dropped 2.5 percent to 19.3 million barrels a day last week, according to an Energy Department report on Aug. 4.

Gasoline supplies increased 729,000 barrels, or 0.3 percent, to 223 million, the highest level since April 30. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 2.17 million barrels to 169.7 million, the highest level since the week ended Oct. 16.

Increasing fuel supplies are helping narrow the margin, or crack spread, for processing three barrels of oil into two of gasoline and one of heating oil by 6.9 percent to $8.576 a barrel, based on New York futures prices. It’s the lowest margin since February and the biggest drop since June 23.

Gasoline for September delivery fell 5.17 cents, or 2.4 percent, to settle at $2.1127 a gallon in New York, the biggest decline since July 1. Heating oil for September settlement dropped 3.96 cents, or 1.8 percent, to end the session at $2.1472 a gallon.

The Reuters/Jefferies CRB Index of 16 raw materials fell 1.1 percent to 274.71 at 3:21 p.m., the biggest drop since June 29.

‘Quite Entrenched’

“I don’t see a lot of upside in oil right now, oil’s quite entrenched,” Francisco Blanch, Bank of America Merrill Lynch’s head of commodities research, said in an interview on Bloomberg Television’s InsideTrack program in New York today. “Oil being between $75 and $85 is probably OK for the economy. If it overshoots maybe $15, $20, it’s going to be a bad story.”

Chinese demand growth for oil products may slow to 4 percent in the second half of the year from 14 percent in the first as the world’s fastest-growing major economy cools, Gong Manying, market research director at PetroChina Co.’s planning and engineering institute, said by telephone from Beijing today.

The U.S. and China, the world’s biggest energy-consuming countries, accounted for 32 percent of global oil demand in 2009, according to BP Plc, which publishes its BP Statistical Review of World Energy each June.

Oil volume on the Nymex was 648,053 contracts as of 3:26 p.m. in New York. Volume totaled 468,871 contracts yesterday, 31 percent below the average of the past three months. Open interest was 1.26 million contracts.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.