Washington - West Texas Intermediate crude headed for the biggest weekly drop in six months as US employers hired less than half the number of workers forecast in March, raising concern that economic growth won’t be strong enough to support oil demand.
Prices tumbled for the fourth time in five days after the Labor Department said payrolls climbed by 88,000, the smallest gain in nine months.
Economists surveyed by Bloomberg had expected an advance of 190,000.
US inventories increased to a 22-year high in an April 3 Energy Information Administration report as oil production stayed near the most since 1992.
“People are surprised by the jobs numbers,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
“The market had been inflated for a while. Whether this represents the beginning of a bear run is not clear, but it’s clearly the ending of the bull run.”
WTI oil for May delivery dropped 84 cents, or 0.9 percent, to $92.42 a barrel at 10:22 a.m. on the New York Mercantile Exchange after falling to $91.91, the lowest intraday level since March 21.
Prices are down 4.9 percent this week, heading for the biggest weekly loss since September 21.
Trading was 16 percent above the 100-day average for the time of day.
Brent crude for May settlement declined $1.42, or 1.3 percent, to $104.92 a barrel on the London-based ICE Futures Europe exchange.
Trading was 44 percent above the 100-day average.
Unemployment Rate
The unemployment rate, derived from a separate survey of households, fell last month to 7.6 percent from 7.7 percent in February, the Labor Department said.
The figure, the lowest since December 2008, reflected a 496,000 decline in the size of the labor force. The labor force participation rate fell to 63.3 percent, the lowest since May 1979.
“This is a disappointing jobs report and oil should trade lower,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant.
This week’s loss in WTI has wiped out last week’s gain of 3.8 percent, which came after a Commerce Department report showed that US gross domestic product rose at a 0.4 percent annual rate in the fourth quarter, up from prior estimate of 0.1 percent.
US crude stockpiles expanded by 2.71 million barrels in the week ended March 29 to 388.6 million, the most since 1990, the Energy Information Administration, the Energy Department’s statistical arm, said on April 3.
Production was 7.15 million barrels a day.
Crude Supply
Crude will probably fall next week on signs of slower economic growth, a Bloomberg survey showed. Fourteen of 26 analysts and traders, or 54 percent, forecast WTI will drop through April 12.
Eight respondents, or 31 percent, predicted a gain and four said there will be little change.
Oil demand will be “less than it was before” in the next few months, Maria van der Hoeven, the executive director of the International Energy Agency, said yesterday in a Bloomberg Television interview.
The IEA’s next monthly market report will be published on April 11.
Oil also declined as euro-area retail sales fell in February.
Sales in the 17-nation currency bloc decreased 0.3 percent from January, when they rose a revised 0.9 percent, the European Union’s statistics office in Luxembourg said today.
The US and the European Union accounted for 36 percent of world oil demand in 2011, according to BP Plc’s Statistical Review of World Energy.
Dollar Weakens
Oil reduced losses as the dollar weakened against the euro on speculation that the Federal Reserve will continue to support economic growth with its bond-buying stimulus program, known as quantitative easing.
“The Fed’s QE program is going to continue longer,” Schenker said.
Fed Vice Chairman Janet Yellen threw her support behind a proposal to vary the pace of the central bank’s bond buying based on changes in prospects for the world’s largest economy during a speech yesterday.
The dollar fell to $1.3029 per euro, the lowest level since March 25.
A weaker dollar increases oil’s appeal as an investment alternative. - Bloomberg News