Oil falls further after downbeat US data

1st June 2011, Comments 0 comments

Oil prices sank further on Wednesday after more disappointing economic data but the market remained on alert over the eurozone debt crisis and US supply disruptions.

New York's main contract, light sweet crude for delivery in July, dipped 85 cents to $101.85 per barrel.

Brent North Sea crude for July dropped 64 cents to $116.09.

Oil extended losses after more poor US data which raised concerns about the demand outlook in the world's biggest oil-consuming nation.

Payrolls firm ADP reported that the non-farm private sector added 38,000 jobs in May, well below the consensus estimate of 170,000. The April figure was revised upward to 177,000.

Meanwhile, the Institute of Supply Management manufacturing survey for May dropped nearly seven percentage points from April to 53.5 percent. New orders alone dropped by almost a fifth.

"The sharp decline in the US ISM manufacturing index to a 19-month low of 53.5 in May ... will only add to fears that the economy has hit another soft patch," said Capital Economics analyst Paul Ashworth.

"That decline mirrors the sharp deterioration in the corresponding ISM non-manufacturing survey in April and comes on the heels of the much weaker than expected ADP survey."

The oil market was already under pressure following earlier news that eurozone manufacturing suffered its steepest fall in May since the height of the global financial crisis in 2008.

In a further blow, it emerged that Chinese factories expanded in May at their slowest pace in 10 months while Australia's economy suffered its sharpest contraction for 20 years in the first three months of 2011, shrinking 1.2 percent quarter-on-quarter after wild weather rocked mining and farms.

Oil had spiked higher on Tuesday, winning support from the weak dollar, amid hopes for another Greek debt bailout, and helped by fresh supply problems in the United States and intensifying unrest in Yemen.

"Crude rallied in early trading on Tuesday, underpinned by fresh supply disruptions in the United States and a weaker dollar," said VTB commodities analyst Andrey Kryuchenkov.

"Supportive comments over a new aid tranche for Greece to help the country meet its debt obligations from policymakers in the eurozone helped to push the single currency higher and restore some confidence on the broader market.

"More importantly, though, TransCanada announced a shutdown of its crucial 591,000 barrel-per-day (bpd) Keystone pipeline which carries Canadian oil from Alberta to the US Midwest hub at Cushing where crude inventories are more than plentiful at the moment."

Kryuchenkov added: "It is a temporary disruption caused by a pipeline leak but it is supportive given ongoing supply side jitters globally."

This week's snapshot of US crude inventories will be published on Thursday, one day later than normal due to a public holiday on Monday.

Investors are also looking ahead to the June 8 ministerial meeting of the Organisation of Petroleum Exporting Countries in Vienna.


© 2011 AFP

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