WTI, Brent Oils Set for Weekly Drop on Slow Jobs Growth

West Texas Intermediate and Brent crudes dropped after weaker-than-estimated U.S. jobs growth in August and as Ukraine and pro-Russian separatists agreed to a cease-fire.

Both benchmark oils capped weekly declines. U.S. employers added the fewest number of jobs this year in August, Labor Department data showed today. The two sides agreed to stop fighting at 6 p.m. local time today, Heidi Tagliavini, a representative of the Organization for Security and Cooperation in Europe, said after talks in Minsk, Belarus. Russia is the world’s largest energy exporter.

“The jobless report was disappointing,” Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston, said by phone. “It’s evidence that the economy isn’t going gangbusters. This raises demand concerns, especially when economies elsewhere are looking weak.”

WTI for October delivery slipped $1.16, or 1.2 percent, to close at $93.29 a barrel on the New York Mercantile Exchange. Prices decreased 2.8 percent this week and are down 5.2 percent this year.

Brent for October settlement dropped $1.01, or 1 percent, to end the session at $100.82 a barrel on the London-based ICE Futures Europe exchange. The contract fell 2.3 percent this week. The European benchmark crude closed at a $7.53 premium to WTI, up from $7.38 yesterday.

The 142,000 advance in payrolls was weaker than the lowest estimate in a Bloomberg survey and followed a revised 212,000 gain in July, figures from the Labor Department showed. The median estimate was for a 230,000 increase.

Market Skepticism

“There’s a lot of skepticism about today’s numbers and the market may shrug it off,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The weekly jobs numbers, the ISM and a slew of other positive data has pointed to robust U.S. economic growth. There’s a sense that these numbers may be revised higher.”

Jobless claims rose by 4,000 to 302,000 last week, Labor Department data showed yesterday. The total number of people on benefit rolls fell to the lowest level in more than seven years.

U.S. service providers such as retailers and construction firms expanded in August at the fastest pace in nine years. The Institute for Supply Management’s non-manufacturing index climbed to 59.6, the highest since August 2005, from 58.7 a month earlier, the Tempe, Arizona-based group said yesterday.

Fed Meeting

The Federal Reserve is gauging the strength of the labor market as it winds down a bond-buying program and considers the timing of raising interest rates. Policy officials next meet Sept. 16-17.

“When we come in next week the question is going to be what’s the Fed going to do and what will that mean for demand,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $120 billion of assets, said by phone. “This is going to be an important Fed meeting.”

A lasting truce between the Ukrainian government and the rebels would be the biggest breakthrough yet in the conflict, which has killed more than 2,600 people and soured Russia’s relations with its former Cold War foes to the worst in more than two decades. Ukraine, the U.S. and Europe say President Vladimir Putin is backing the insurgency with financing, weapons and manpower. Russia denies any involvement.

Economic Sanctions

The cease-fire announcement comes as representatives of the 28 European Union governments meet in Brussels today to consider tightening the economic sanctions that were imposed on Russia in July. Proposals include barring some Russian state-owned defense and energy companies from raising capital in the EU, a U.K. official said.

U.S. President Barack Obama said NATO allies are prepared to join military action to battle Islamic State extremists and urged Arab states in the Middle East to engage in the fight. WTI reached a nine-month high in June as the militants advanced across vast areas of northern Iraq.

“There was unanimity over the last two days that ISIL poses a significant threat to NATO members, and there was a recognition that we have to take action,” Obama said at a news conference in Newport, Wales, wrapping up the annual summit of the North Atlantic Treaty Organization.

WTI may extend losses next week amid ample U.S. supply, a separate Bloomberg survey shows. Thirteen of 30 analysts, or 43 percent, predict prices will decline through Sept. 12, while 30 percent of respondents forecast an increase.

“The bias right now is bearish,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “There are a lot of blinking lights out there that caution one to be bearish. I would be reluctant to be a big buyer right now.”

October gasoline futures declined 1.65 cents, or 0.6 percent, to settle at $2.5834 a gallon on the Nymex. Ultra low sulfur diesel for October delivery fell 1.71 cents, or 0.6 percent, to close at $2.8192 a gallon.

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