Oil prices slide on US payrolls report

July 09, 2011 | 08:43

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World oil prices sank on Friday as traders took profits from the recent rally and dismal US jobs data doused hopes of an imminent revival of economic growth.

New York's main contract, West Texas Intermediate for delivery in August, tumbled $2.47 to $96.20 a barrel, after gaining $2.02 on Thursday.

But London's main contract, Brent North Sea oil for August dropped only 26 cents to $118.33 a barrel, suggesting some residual strength in prices.

After oil prices surged Thursday on expectations of buoyant data on job creation, traders were smacked by how bad the Labor Department numbers were.

The US economy created a paltry 18,000 jobs in June, a fraction of forecasts and not even enough to keep up with population growth.

That pushing the unemployment rate up to 9.2 per cent, and signaled that US growth remained almost stagnant during the second quarter after a poor first quarter.

"The market really was reacting to the very disappointing job report, and as a result expectations have been lowered for petroleum demand in the US," said Andy Lipow, of Lipow Oil Associates.

"What we continue to see is reduction in year-on-year gasoline demand. As a result of the job figures, the expectation of gasoline demand recovering is pushed further in the future," he said.

"In the near term I expect a very volatile market influenced by the economic data and by the events by the Middle East," he added.

But sentiment had to be balanced by other economic signals: still-strong growth in Asia and in Germany, and an unexpected fall in crude and gasoline inventories in the United States this week, which suggested stronger demand as pump prices fell and summer vacations began.

AFP

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