Oil drops 2 pct after weak U.S. jobs data

NEW YORK - Oil prices fell more than two percent on Thursday as weak U.S. economic data reinforced worries about shrinking fuel demand in the world’s top energy consumer.

By (Reuters)

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Published: Sat 2 Aug 2008, 1:55 AM

Last updated: Sun 5 Apr 2015, 11:47 AM

U.S. crude traded down $2.69 to settle at $124.08 a barrel, erasing most of Wednesday’s $4.58 jump. London Brent crude gave up $3.13 to $123.98 a barrel.

The losses came after the U.S. Labor Department reported a sizable increase in jobless claims, adding to worries that high energy prices and a softening economy are eroding fuel demand.

“Declining levels of demand are still in the forefront of the market,” said Gene McGillian, an analyst at Tradition Energy.

U.S. gasoline consumption already has been trailing last year’s levels by about 1.5 percent as pump prices hit record highs and the economy sours, according to the most recent government data. Demand growth also has been hit in Europe.

Demand worries have pulled oil down from a record above $147 a barrel hit on July 11, the peak of a six-year rally set in motion by an Asian economic boom.

Tempering some of oil’s losses Thursday was news that rebel attacks in Nigeria this week shut 40,000 barrels per day of output by Royal Dutch Shell, adding to a string of bombings that has disrupted the OPEC nation’s production.

Dealers also have been on edge due to the possibility of hurricanes denting production in the Gulf of Mexico.

“Supply snags, like Shell saying only 40,000 barrels per day were shut by the pipeline attack in Nigeria, have so far been minimal and nothing is going on in the tropics,” Tradition’s McGillian said.

Traders also have been watching political tensions between the West and OPEC member Iran over Tehran’s nuclear program, which some dealers say pose a threat to Middle East exports.

Western powers had given Iran two weeks from July 19 to respond to their offer to hold off imposing more U.N. sanctions, if Tehran would freeze expansion of its nuclear work.

Oil rallied on Wednesday after a government report showed a surprise fall in U.S. gasoline stocks last week.

“There was a gasoline-led rally, but now I think it’s running out of puff. It seems to need constant bullish news at the moment to push it up,” said Christopher Bellew, of Bache Commodities. ”Everyone is talking about demand destruction.”

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