Oil prices tumble on US payrolls report

4th June 2010, Comments 0 comments

Oil prices tumbled by nearly three dollars on Friday, hit by weaker-than-expected US payrolls data and a stronger US currency, analysts said.

New York's main contract, light sweet crude for delivery in July, sank 2.83 dollars to 71.78 dollars a barrel.

London's Brent North Sea crude for July also slumped 2.83 dollars to 72.58 dollars.

The US economy created 431,000 nonfarm jobs in May, well short of the 500,000 expected by most analysts, official data showed on Friday.

More worrying, the private sector created only 41,000 jobs as the bulk of the new jobs came from temporary government hiring for a US census. Most analysts had expected 226,000 private payrolls to be added.

The unemployment rate slipped to 9.7 percent from 9.9 percent in April as the labour force contracted.

"The US payroll figures did manage to surprise the energy market on the negative side," said Sucden research analyst Myrto Sokou in London.

"The energy market over-reacted and crude oil prices fell towards 73 dollars per barrel, getting also some pressure from the strengthening US dollar.

"However, investors should also remember that US driving and hurricane seasons have just started, showing some encouraging signs for the energy market in the near-term."

The European single currency plunged to a fresh four-year low against the dollar.

The euro hit 1.1972 dollars in late afternoon deals, a low last seen on March 24, 2006, as sentiment was hammered by contagion fears over the eurozone debt crisis.

The single unit fell despite the much weaker-than-expected US jobs report, with investors attracted by the dollar's safe-haven status at a time of economic uncertainty.

A stronger dollar tends to dampen demand for dollar-priced crude oil which becomes more expensive to buyers using weaker currencies. In turn, that pushes prices downwards.

Oil prices jumped on Thursday after a weekly oil inventories report from the US government's Department of Energy (DoE) showed a larger-than-expected dip in gasoline (petrol) inventories, indicating stronger demand.

Gasoline reserves plunged 2.6 million barrels to 219 million barrels in the week ending May 28, the DoE said. Most analysts had forecast a drop of 700,000 barrels.

"Indications that US oil demand is on the rise helped oil prices move higher," said PVM analyst David Hufton. "Adding to the bullish mix is the prospect of an active hurricane season, the potential supply fallout from the (BP Gulf of Mexico) incident and Middle Eastern tensions."

© 2010 AFP

0 Comments To This Article