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Oil Heads for Third Weekly Drop Before U.S. Jobs Data

Oil headed for a third weekly decline in New York as concern that supply is exceeding demand outweighed signs of a jobs recovery in the U.S., the world’s largest consumer of crude.

Futures pared losses as the U.S. jobless rate unexpectedly fell to 7.8 percent in September, the lowest since January 2009, according to the Labor Department. The country’s crude output climbed to the highest level in more than 15 years last week, the Energy Department said. Saudi Arabia, OPEC’s biggest producer, sees no difficulty in meeting demand, Oil Minister Ali al-Naimi said yesterday.

“In the short term the oil market is oversupplied as the Saudis flood the market at a seasonally weak demand period,” said Guy Wolf, a strategist at London-based commodities broker Marex Spectron Group Ltd., who predicts Brent crude will advance toward $125 a barrel this year as global growth picks up. “As we head into the year-end the market will tighten.”

Crude for November delivery dropped 39 cents to $91.32 a barrel in electronic trading on the New York Mercantile Exchange at 1:40 p.m. London time. The contract rose $3.57 to $91.71 yesterday. Prices are down 0.9 percent this week, in the longest run of weekly declines since June, and 7.6 percent this year.

Brent for November settlement was at $112.45, 13 cents lower on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $21.19 to New York- traded West Texas Intermediate grade. It widened to $21.46 earlier today, the biggest spread since Aug. 17.

Fibonacci Retracement

The U.S. economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000. The jobless rate dropped from 8.1 percent and hourly earnings climbed more than forecast.

Prices of about $110 are “possibly the greatest risk to the global economic recovery,” Fatih Birol, chief economist at the International Energy Agency, said at a conference today in Ankara, Turkey. “It will be a surprise to see oil prices dropping below” this level, he said.

Oil in New York has long-term technical support at $89.83 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 50 percent Fibonacci retracement of the drop to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Buy orders tend to be clustered near chart-support levels.

Mortar Bomb

Prices surged yesterday as Turkey’s parliament authorized the government to order military action in Syria after a mortar bomb fired across the border on Oct. 3 killed five Turks. The decision highlights the risk that neighboring countries may be drawn into Syria’s civil war. Countries in the Middle East and North Africa were responsible for 36 percent of global oil production and held 52 percent of proved reserves in 2011, according to BP Plc’s Statistical Review of World Energy.

U.S. crude output rose by 11,000 barrels a day to 6.52 million last week, the most since December 1996, the Energy Department reported on Oct. 3.

Oil prices may slide next week as U.S. production rises, a Bloomberg survey showed. Twenty-one of 38 analysts, or 55 percent, forecast WTI will drop through Oct. 12. Thirteen respondents, or 34 percent, predicted it will gain and four saw little change. U.S. crude output rose to 6.52 million barrels a day last week, the most since December 1996, an Energy Department report on Oct. 3 showed.

High Prices

“The situation with the oil market is that current and forecast future demand levels over the next 12 months are well covered by supply and that’s been the driving factor behind the decline we’re seeing in recent weeks,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney.

Prices have been “very high” this year even with an economic slowdown in many countries and the Organization of Petroleum Exporting Countries is helping to keep them under control, al-Naimi said yesterday in Ankara.

Crude is on course for its strongest second half of the year on record, according to the median of 26 analyst estimates tracked by Bloomberg. WTI will cost $94.50 a barrel in New York this quarter, up from $92.20 in the previous three months, the predictions show. The previous highest level for any second half was $91.78 a barrel, in 2011.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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