Oil fell to the lowest in eight months in New York, set for the biggest weekly decline since May, on speculation fuel demand will falter as U.S. economic growth stumbles and Europe’s debt crisis worsens.
Futures dropped as much as 4.3 percent after tumbling 5.8 percent yesterday. Equities in Asia and Europe slumped. The U.S. added 85,000 jobs last month, leaving the 9.2 percent unemployment rate unchanged, according to economists surveyed before data today. Brent crude rebounded after an oil pipeline explosion in Iran, highlighting supply concerns from the world’s biggest producing region.
“In terms of the oil market the recent correction is part of the broader move we saw in equities,” Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA said. “We have greater cross asset correlation since 2009 due to the injection of vast amounts of liquidity by central banks.”
Crude for September delivery dropped as much as $3.76 to $82.87 a barrel in electronic trading on the New York Mercantile Exchange, the lowest intraday price since Nov. 26. The contract traded at $86.08 a barrel as of 12:17 p.m. London time. A close at that level would mean a fall of 10 percent this week, the biggest weekly drop since the first week in May.
Brent for September settlement on the London-based ICE Futures Europe exchange rose as much as 2 percent to $109.38 a barrel and last traded at $108.38 a barrel. It fell as much as 2.8 percent earlier today. The European benchmark is up 14 percent this year. Its premium to U.S. futures widened to $22.20 a barrel. The spread closed at a record $22.67 on Aug. 2.
An Iranian oil pipeline exploded today in Larstan in the west of the country, the state-run Mehr news service said. Flows will resume in a few hours, the service said. The nation is the second-biggest producer in the Organization of Petroleum Exporting Countries.
“The fundamentals didn’t deteriorate in one day to such an extent to warrant this sell off,” Amrita Sen, an oil analyst at Barclays Plc, said by phone from London. “It’s going to remain choppy from here with the macro environment so uncertain.”
Crude in New York, which fell below a long-term Fibonacci support yesterday, has crossed the bottom of a technical downtrend channel at about $85.20 a barrel, according to data compiled by Bloomberg. The 14-day relative strength index for West Texas Intermediate futures also dropped below 30, signaling the market may have fallen too quickly. Today’s reading is 27.1, the lowest since May 2010.
BNP Paribas’ Tchilinguirian said the oil price may rise, partly because of uncertainty of supply. “China’s economy will accelerate in the second half of the year, supporting oil demand growth,” he said. “Thus going long oil WTI at $85-$86 is extremely attractive.”
The Stoxx Europe 600 Index plunged as much as 3.3 percent, extending its loss for the week to 11 percent. The MSCI Asia Pacific Index fell 4.1 percent, taking its weekly loss to 8.1 percent. That will be the steepest one-week drop since October 2008, when credit markets froze following the bankruptcy of Lehman Brother Holdings Inc. a month earlier.
The Labor Department’s data are due at 8:30 a.m. in Washington.
The Bloomberg Consumer Comfort Index was minus 47.6 in the week to July 31, the lowest since May. Confidence among women fell to the lowest level since October 2009, while Americans making more than $100,000 a year were the most pessimistic since November 2009.
Tropical Storm Emily was broken up by 10,000-foot (3,000- meter) mountains in Haiti and the Dominican Republic and storm warnings throughout the Caribbean were dropped. Emily’s maximum winds have fallen to 35 miles (56 kilometers) per hour, below the threshold of 39 mph used to designate a system as a tropical storm, according to the U.S. National Hurricane Center.
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