latest economic news about Oil slips to near $86 in Europe on weak US economy, crude demand outlook from Washington Post
By Associated Press,
Oil prices extended losses to near $86 a barrel on Friday amid fears that a slowing global economy will weaken demand for crude, but recovered from earlier lows on reports of an explosion at a pipeline in Iran.
By early afternoon in Europe, benchmark oil for September delivery was down 28 cents to $86.35 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it fell as low as $82.87. On Thursday, crude tumbled $5.30 to settle at $86.63.
In London, Brent crude gained $1.20 at $108.45 per barrel on the ICE Futures exchange.
“There is high volatility and nervous trading in the oil market at the moment,” according to an energy report from Sucden Financial in London.
Oil and other commodities were dragged down by a plunge in global stock markets as traders lost confidence in U.S. economic growth. The Dow Jones industrial average sank 4.3 percent Thursday and stock markets in Asia and Europe were also sharply lower Friday.
Investors fled to lower-risk assets, such as the U.S. dollar, which exacerbated oil’s decline. Crude usually falls when the dollar gains since a stronger U.S. currency makes commodities more expensive for investors with other currencies.
Analysts, however, said reports of an explosion at an oil pipeline in Iran, the second-largest OPEC producer behind Saudi Arabia, helped prices pare losses, with the Brent contract even reversing its slide and posting gains.
“The general market sentiment has been seriously hurt following heavy losses in the global equity markets,” Sucden Financial said. “However, the explosion in the Iran’s oil pipeline today provided some support and pushed oil prices higher.”
All eyes will be on Friday’s July jobs report for evidence about the strength of the U.S. economy. Economists expect that 90,000 jobs were created in the U.S. last month, which is not enough to lower the unemployment rate, currently at 9.2 percent.
“Economic worries in the U.S. led to fears that oil demand will soften dramatically,” energy consultant Cameron Hanover said in a report. “If Friday’s jobs number is surprisingly robust or bullish, we could see assets of every stripe rally.”
Some analysts point to growing crude consumption and robust economic growth in emerging markets to suggest supply and demand fundamentals don’t justify the drop in oil prices from $100 two weeks ago.
“Commodity market participants are running the risk of being fooled by the gloomy macroeconomic environment and overlooking the bigger picture of a market that remains fundamentally well supported,” Barclays Capital said in a report.
The drop in crude — oil is down from near $115 in May — should also lower costs for products such as gasoline and help free up some consumer purchasing power.
In other Nymex trading in September contracts, heating oil gained 2.89 cents to $2.9228 a gallon while gasoline added 3.68 cents to $2.7740 a gallon. Natural gas futures slid 1.2 cents to $3.929 per 1,000 cubic feet.
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Alex Kennedy in Singapore contributed to this report.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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