Oil price plunge continues ahead of US jobs data
May. 06, 2011
Oil prices continued to plunge on Friday, slipping to near $97 a barrel as investors worried that a weakening U.S. jobs market may undermine demand for crude in the world's largest economy.
By early afternoon in Europe, benchmark crude for June delivery was down $2.60 at $97.20 a barrel in electronic trading on the New York Mercantile Exchange. Earlier, it fell as low as $94.63.
On Thursday, the contract plunged $9.44 to settle at $99.80 — the biggest one-day percentage decline since April 2009 — because of signs U.S. economic growth is slowing. The Labor Department said that first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months.
In London, Brent crude for June delivery was down $2.38 to $108.42 a barrel on the ICE Futures exchange.
Investors will be closely watching the government's non-farm payroll numbers scheduled to be released later Friday. Economists forecast that employers added 185,000 workers in April and the unemployment rate is expected to remain unchanged at 8.8 percent.
Oil has retreated after gaining 35 percent from February to reach $114 last week. Other commodities that had jumped in recent months, such as gold and silver, have also seen steep declines this week.
"The scale of the price slump is exaggerated ... and primarily due to the abrupt change of sentiment of speculative investors," said analysts at Commerzbank in Frankfurt. "The fundamental situation has not changed sharply enough to justify the huge price discounts."
A stronger dollar, which makes oil more expensive for investors with other currencies, also helped push crude prices down.
Some analysts expect oil to resume its rise as political unrest in the Middle East and North Africa could spread and threaten to disrupt crude supplies in the oil-rich region.
"Those geopolitical risks have not disappeared," said Victor Shum, an analyst with energy consultancy Purvin & Gertz in Singapore. "I think the up trend over the long term is still in tact, and what we saw yesterday was a big bump in the road."
In other Nymex trading in June contracts, heating oil fell 5.36 cents to $2.8333 a gallon and gasoline slid 3.51 cents to $3.0603 a gallon. Natural gas futures were down 3.1 cents at $4.23 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.