WTI Falls as Employers Add Fewer Workers Than Expected

West Texas Intermediate crude dropped, paring a weekly advance, after U.S. employers added fewer workers than anticipated last month.

Futures fell 0.9 percent on Labor Department figures showing that payrolls rose 162,000 in July, the smallest gain in four months. A 185,000 increase was the median forecast of 93 economists surveyed by Bloomberg. Brent earlier exceeded $110 for the first time since April after Libya’s head of oil security quit as protests shut export terminals in the country.

“The disappointing employment numbers are weighing on the market,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “A lot of the rally this week was based on the prospect for an improving economy and the prospect for demand growth in the U.S. Oil is taking today’s report pretty hard.”

WTI crude for September delivery declined 95 cents to settle at $106.94 a barrel on the New York Mercantile Exchange. Prices increased 2.1 percent this week. Oil rose 2.7 percent to $107.89 yesterday, the most since July 10 and the highest close since July 19. The volume of all futures traded was 13 percent lower than the 100-day average at 3:52 p.m.

Brent oil for September settlement dropped 59 cents, or 0.5 percent, to end the session at $108.95 a barrel on the London-based ICE Futures Europe exchange. The contract surged to $110.09 earlier, topping $110 for the first time since April 3. The volume of all futures traded was 26 percent below the 100-day average.

The European benchmark grade’s premium to WTI widened to $2.01 from $1.65 yesterday.

Jobless Rate

American workers spent fewer hours on the job and hourly earnings fell for the first time since October, according to the Labor Department report released in Washington. The jobless rate dropped to 7.4 percent.

“The employment data came in soft, and that’s a worry for the market,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.6 billion. “The hope has been that economic growth will accelerate, and this is another sign that it’s glacial.”

Futures climbed earlier this week on signs U.S. economic growth is accelerating. Gross domestic product, the value of all goods and services produced, expanded at a 1.7 percent annualized rate in the April-through-June period after a 1.1 percent advance in the prior three months, Commerce Department data showed on July 31.

Market Outlook

WTI may rise next week on signs that growth will stoke fuel demand, a separate Bloomberg survey showed. Fifteen of 33 analysts and traders, or 45 percent, forecast crude will increase through Aug. 9. Thirteen respondents, or 39 percent, predicted a decline, and five said there would be no change.

“The market is moving lower on the disappointing jobs number,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market has overextended to the upside this week and was set for a pullback. This is probably a temporary setback.”

Colonel Ali Ahrash, Libya’s head of security for oil and gas infrastructure, has resigned, Deputy Oil Minister Omar Shakmak said yesterday in Washington. Libyan crude exports were set to drop by almost 80 percent after terminals were shut amid labor protests, Oil Minister Abdulbari Al-Arusi said July 31.

The closures were forecast to cut shipments by about 1.1 million barrels a day from 1.425 million, according to Al-Arusi.

Libyan crude output tumbled 330,000 barrels to 800,000 barrels a day in July, a Bloomberg survey of Organization of Petroleum Exporting Countries production showed. It was the fourth straight decline and sent production to the lowest level since December 2011.

Terrorist Warnings

The U.S. State Department issued a worldwide travel alert today warning citizens of potential terror attacks in the Middle East and North Africa by al-Qaeda and its affiliates. Attacks are seen as occurring in or emanating from the Arabian peninsula, the department said. Yesterday, the department said that a number of U.S. embassies and other facilities would be closed this weekend as a precaution.

Russia, the world’s biggest oil-producing country, pumped 10.43 million barrels a day of crude and condensate last month, near a post-Soviet record, according to preliminary data sent by e-mail today from the Energy Ministry’s CDU-TEK unit in Moscow. Soviet-era production in Russia peaked at 11.48 million barrels in 1987.

Implied volatility for at-the-money WTI options expiring in September was 20.5 percent, down from 21.8 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 483,438 contracts as of 3:52 p.m. It totaled 700,506 contracts yesterday, 5.9 percent above the three-month average. Open interest was 1.86 million contracts.

Before it's here, it's on the Bloomberg Terminal.