Oil Falls Below $76 on Services Report, Heads for Weekly Drop
Dec/06/2009 | Under Oil and Gas Drilling - Petroleum
Crude oil fell for a third day after a report showed service industries in the U.S. unexpectedly contracted in November, raising concern fuel demand may be slow to recover from the worst recession since World War II.
Oil headed for a second weekly decline after the Institute for Supply Management’s index of non-manufacturing businesses that make up almost 90 percent of the economy slipped to 48.7 from 50.6 in October, the Tempe, Arizona-based group said yesterday. A Labor Department report today will probably show the U.S. economy lost jobs in November.
“Oil is under pressure now simply because of the latest economic data out of the U.S.,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The concern is that the unemployment report will also show poor performance. Some of that expectation is now priced into oil.”
Crude oil for January delivery fell as much as 85 cents, or 1.1 percent, to $75.61 a barrel in electronic trading on the New York Mercantile Exchange. It was at $75.94 at 11:35 a.m. Singapore time. Yesterday, the contract fell 14 cents to $76.46 a barrel, a four-day low. Prices, up 70 percent this year, are poised for a 0.2 percent weekly decline.
The Labor Department may say in a report today U.S. employers dropped 125,000 non-farm workers from their payrolls, according to the median of forecasts from 81 economists surveyed by Bloomberg News.
“The ISM non-manufacturing index reading was weaker than expected and that raised some investor anxiety ahead of the employment report,” said Toby Hassall, a research analyst with CWA Global Markets Pty in Sydney. “Policy makers have indicated they see the recovery as being very uneven, and I expect the unemployment rate to stay elevated for an extended period.”
Dollar Decline
The euro rose against the dollar and the yen after European Central Bank President Jean-Claude Trichet announced yesterday the first steps toward scaling back emergency lending designed to revive the region’s economy.
The U.S. currency was little changed after falling to $1.5053 per euro yesterday in New York. A weaker dollar increases the appeal of commodities as an alternative investment.
“The weaker dollar has been a very supportive element for oil,” Hassall said. “There is nothing to suggest the longer term downward trend in the dollar is about to break.”
Asian shares pulled back from a 15-month high today after U.S. equities declined yesterday, ending a three-day winning streak for the Standard & Poor’s 500 Index. The S&P 500 slipped 0.8 percent in New York.
Fuel Stockpiles
Oil declined 2.3 percent Dec. 2 after the U.S. Energy Department reported crude supplies rose 2.09 million barrels to 339.9 million, the highest level since August.
Total U.S. daily fuel demand averaged 18.5 million barrels in the four weeks ended Nov. 27, down 3.2 percent from a year earlier, the department said. Consumption slipped by 497,000 barrels a day last week.
“Even though the financial factors have been the main drivers of oil pricing, fundamentals do matter,” said Shum at Purvin & Gertz. “The weekly reports of inventory have been holding back further gains in oil.”
Brent crude oil for January settlement fell as much as 82 cents, or 1.1 percent, to $77.54 a barrel on the London-based ICE Futures Europe exchange. The contract traded at $77.87 a barrel at 11:32 a.m. in Singapore. Yesterday, it rose 48 cents, or 0.6 percent, to $78.36 a barrel.