Bloomberg News

Oil Falls From Near Three-Week High After U.S. Employment Report

June 01, 2011

June 1 (Bloomberg) -- Oil declined from near the highest in three weeks on concern demand in the U.S. may falter following a report showing that U.S. companies added fewer jobs than forecast last month.

Futures fell as much as 0.8 percent after figures from ADP Employer Services showed companies in the U.S. added 38,000 workers to payrolls in May, compared with a median estimate of 175,000 in a Bloomberg News survey.

“The most obvious signs that high prices are having direct impact are coming from North America,” David Fyfe, head of the International Energy Agency’s oil industry and markets division, said in an interview today. “The longer that prices stay high, the more likely they’ll drag on underlying economic growth.”

Crude for July delivery fell as much as 80 cents to $101.90 and was at $102.12 a barrel in electronic trading on the New York Mercantile Exchange at 1:58 p.m. London time. Prices climbed $2.11 to $102.70 yesterday, the highest since May 10, and slipped 9.9 percent in May, the first drop in nine months.

Brent crude for July delivery was down 70 cents at $116.03 a barrel on the London-based ICE Futures Europe exchange. The contract yesterday increased $2.05, or 1.8 percent, to $116.73. The European benchmark slid 7.3 percent in May and is 60 percent higher in the past year.

Inventory Report

An Energy Department report tomorrow may show U.S. crude stockpiles declined 1.8 million barrels last week from 370.9 million, a Bloomberg News survey of analysts shows. Refiners are expected to raise output by 0.5 percentage point to 86.8 percent of capacity as they ramp up gasoline production for the summer demand season.

Motor fuel supplies probably increased 650,000 barrels, the survey shows. Gasoline consumption peaks between Memorial Day, which this year fell on May 30, and Labor Day in early September, when Americans traditionally take vacations.

Inventories of distillates, a category that includes heating oil and diesel, were probably unchanged at 141.1 million barrels, according to the median estimate in the survey.

The industry-funded American Petroleum Institute will release its weekly data today.

Oil tanks at Cushing, Oklahoma, were at 86 percent of working storage capacity as of the end of March, the Energy Department said yesterday. It’s the first time the department has published a utilization figure for the delivery point for the West Texas Intermediate grade, said Jonathan Cogan, a spokesman for the department’s Energy Information Administration.

--With assistance from Christian Schmollinger in Singapore. Editors: John Buckley, Rob Verdonck

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net


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