OIL FUTURES: Crude Plunges Below $100, At Lowest Since Feb
May 04 2012 - 3:45PM
Dow Jones News
Oil futures tumbled to their lowest level in three months
Friday, blowing through $100 a barrel and continuing on lower, in a
rout spurred by a weaker-than-expected reading on U.S. employment
in April.
The weak jobs data has prompted fresh worries about global oil
demand, and comes on the heels of several recent reports that
suggest an eroding outlook for the global economy.
"The whole global economy has been starting to show some
cracks," said Tom Bentz, director at BNP Paribas Prime Brokerage in
New York. "It's not just today's report--it's a general lack of
confidence that's growing."
Light, sweet crude for June delivery settled $4.05, or 4%, lower
at $98.49 a barrel on the New York Mercantile Exchange, the lowest
finish for the benchmark since Feb. 7. The slide marks the biggest
one-day drop for the contract since December.
Brent crude on the ICE futures exchange recently fell $2.87, or
2.5%, to $113.21 a barrel, on track for its weakest finish since
Feb. 2.
Crude futures fell steadily throughout the day after the Labor
Department said U.S. nonfarm payrolls rose by 115,000 in April,
less than the gain of 168,000 expected by economists surveyed by
Dow Jones Newswires. The unemployment rate fell a tenth of
percentage point to 8.1%.
Employment data in the U.S., the world's biggest oil consumer,
is a closely watched indicator of fuel and oil demand. Weak
employment data usually correlates with lackluster demand as fewer
motorists travel to work or take vacations.
The report, however, was just one additional piece of data in
recent weeks that has weakened the case for oil prices above $100 a
barrel, and traders took the opportunity to cash out bets on higher
prices.
"If anyone had an inkling of bearish sentiment, today's the day
to pull out fast," said Jason Schenker, energy analyst at Prestige
Economics.
Nymex crude futures have fallen 10.3% since hitting a recent
settlement high of $109.77 a barrel in late February. Brent crude,
the European benchmark, is also down more than 10% off its high of
more than $126.
Earlier this week, Spain disclosed that it is officially in a
recession, while a survey of economic activity in the euro-zone in
April found a faster contraction than previously thought.
Oil supply, meanwhile, is looking increasingly ample. Saudi
Arabia, the world's largest oil exporter, has hiked production to
10 million barrels a day in recent months. And oil inventories in
the U.S. continue to swell, rising 10% over the last 10 weeks amid
weak demand for crude.
"There's plenty of supply out there, and now you're introducing
more and more demand concerns," says Kyle Cooper, managing partner
at IAF Energy Advisors. "$100 a barrel is not cheap--maybe $95 is
more realistic."
Front-month June reformulated gasoline blendstock, or RBOB,
settled 7.42 cents, or 2.4%, lower at $2.9758 gallon, its lowest
settlement since Feb. 10.
June heating oil settled 7.81 cents, or 2.5%, lower at $3.0088 a
gallon, its weakest finish since Jan. 20.
More information on settlements and highs and lows for futures
on Nymex and ICE platforms can be found by searching for the
following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
-By Dan Strumpf, Dow Jones Newswires; 212-416-2818;
dan.strumpf@dowjones.com
--David Bird contributed to this article.