Bloomberg News

Crude Oil Declines Below $100 on Signs of Slowing U.S. Growth

June 03, 2011

June 3 (Bloomberg) -- Oil fell after a report showed U.S. employers in May added the fewest number of workers in eight months, sparking concern that fuel demand will decline.

Futures have fluctuated from $98 to $104 a barrel this week. Payrolls increased by a less-than-projected 54,000 last month, after a revised 232,000 gain in April that was smaller than initially estimated, Labor Department figures showed today in Washington. The Organization of Petroleum Exporting Countries will respond at its June 8 conference if the world needs more crude, Saudi Arabian Oil Minister Ali Al-Naimi said yesterday.

The U.S. data “will have a negative effect on market sentiment and thereby the appetite for riskier assets such as oil,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “Higher fuel prices in the U.S. seem to have started to bite on demand, and so we don’t expect a big upswing in demand this summer.”

Crude for July delivery traded at $98.80 a barrel, down $1.60, in electronic trading on the New York Mercantile Exchange at 1:45 p.m. in London. It earlier rose as much as 47 cents. Prices are little changed this week and have gained 32 percent in the past year.

Brent crude for July delivery was $1.95 lower at $113.59 a barrel on the London-based ICE Futures Europe exchange.

U.S. Jobs

The European benchmark contract traded at a premium of $14.79 a barrel to U.S. futures, little changed from yesterday. The difference between front-month contracts in London and New York reached a record $19.54 on Feb. 21. The spread averaged 76 cents last year.

OPEC will probably maintain production levels for an eighth consecutive meeting next week, resisting calls to ease the pressure of $100-a-barrel oil on the global economy, according to a survey of analysts by Bloomberg News.

“Speculation on what the future may hold” is the main reason for the current oil price, Saudi Arabia’s Al-Naimi said in Krakow, Poland. “There is no such thing as a fair price.”

Oil fell in intraday trade yesterday after a U.S. Department of Energy report showed crude stockpiles climbed 2.88 million barrels to 373.8 million last week, the highest since May 2009. Supplies were projected to fall by 1.6 million barrels, according to the median of 13 analyst estimates in a Bloomberg News survey.

Gasoline inventories increased for a fourth week, climbing by 2.55 million barrels to 212.3 million, the report showed. Analysts expected a gain of 900,000 barrels, according to the Bloomberg survey. Demand increased 4.5 percent to 9.43 million barrels a day.

Distillate stockpiles, which include diesel and heating oil, fell 976,000 barrels to 140.1 million, the lowest level since April 2009. Analysts forecast a withdrawal of 250,000 barrels.

--With assistance from Christian Schmollinger in Singapore. Editors: Rob Verdonck, Mike Anderson

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

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


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