Oil capped a third weekly drop in New York as signals that supply is exceeding demand outweighed an unexpected decline in the unemployment rate.
Futures completed the longest run of weekly decreases since June after the Energy Department reported Oct. 3 that U.S. crude output rose to 6.52 million barrels a day last week, the most since December 1996. Prices pared their descent earlier when government data showed the U.S. added 114,000 jobs last month as the jobless rate fell to 7.8 percent.
“The fundamentals of the oil market point to ample supplies, especially here in the U.S., and anemic demand,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There is some positive sentiment in the employment data, which is providing some support.”
Crude oil for November delivery fell $1.83, or 2 percent, to settle at $89.88 a barrel on the New York Mercantile Exchange. Prices declined 2.5 percent this week.
Brent oil for November settlement slipped 56 cents, or 0.5 percent, to end the session at $112.02 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $22.14 to New York-traded West Texas Intermediate, the widest differential since Oct. 21, 2011. The spread was up from $20.87 yesterday.
Inventories at Cushing, Oklahoma, the delivery point for WTI, rose 135,000 barrels to 43.9 million last week, according to the department. Surging output from shale-rock formations in the U.S., including the Bakken in North Dakota, and from Canada’s oil sands has bolstered supplies at the hub. Nationwide stockpiles were up 8.4 percent from a year earlier.
Gasoline supplies climbed 114,000 barrels to 195.9 million last week, the first gain in 10 weeks, the report showed.
“The U.S. supply picture explains why WTI continues to decline more than Brent and the spread has widened,” McGillian said.
Total U.S. fuel demand fell 0.3 percent to 18.3 million barrels a day in the four weeks ended Sept. 28, the lowest level since April, the Oct. 3 Energy Department report showed.
“The challenging demand situation here is more than enough to neutralize the impact of the better-than-expected jobs numbers,” said John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund.
The U.S. economy added a revised 142,000 jobs in August, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000 in September. The jobless rate dropped from 8.1 percent and hourly earnings climbed more than forecast.
German factory orders dropped more than economists forecast in August as the debt crisis damped the outlook for growth in Europe’s largest economy. Orders, adjusted for seasonal swings and inflation, fell 1.3 percent from July, the Economy Ministry in Berlin said today. A 0.5 percent decrease was forecast, according to the median of 31 estimates in a Bloomberg survey.
China’s services purchasing managers’ index fell to 53.7 in September from 56.3 in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing Oct. 3. The number was lower than any previous reading in data compiled by Bloomberg starting in March 2011.
“The oil market is really looking beyond the U.S.,” Kilduff said. “The demand prospects on the horizon in China and Europe don’t look promising and are keeping a lid on prices.”
Prices tumbled 4.1 percent on Oct. 3 after the Energy Department report, the biggest decline since June 21. Futures rose 4.1 percent yesterday, the most since Aug. 3.
“We dropped more than $3.50 on Tuesday and then rose by about the same amount yesterday,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “There’s obviously a lot of confusion out there when there’s this much volatility in the market. We’re trying to figure out what direction to go in.”
Oil in New York may slide next week as U.S. production rises, a Bloomberg survey showed. Twenty-one of 38 analysts, or 55 percent, forecast prices will drop through Oct. 12. Thirteen respondents, or 34 percent, predicted it will gain and four saw little change.
Electronic trading volume on the Nymex was 512,734 contracts as of 3:53 p.m. Volume totaled 552,980 contracts yesterday, 5.6 percent above the three-month average. Open interest was 1.56 million.