Bloomberg News

Oil Declines as U.S. Fails to Add Jobs; Storm Shuts Gulf Rigs

September 02, 2011

Sept. 2 (Bloomberg) -- Oil dropped in New York, trimming a second weekly gain, as the U.S. failed to add jobs last month, spurring bets that fuel consumption in the world’s largest economy will suffer.

Futures extended losses after Labor Department data showed employment in the U.S. unexpectedly stagnated in August and the jobless rate held at 9.1 percent. A tropical depression in the Gulf of Mexico prompted companies including BP Plc and Exxon Mobil Corp. to shut almost 6 percent of the area’s crude output. The storm may approach the Louisiana coast this weekend, according to the National Hurricane Center.

“The data is negative enough to believe there will be a very slow recovery, and demand for oil is already weak,” said Eugen Weinberg, Frankfurt-based head of commodities research at Commerzbank AG, who forecasts Brent will average $100 a barrel in the fourth quarter. “But it’s not a complete disaster. I don’t think it’s enough to make the Federal Reserve move.”

Oil for October delivery fell as much as $2.65 a barrel, or 3 percent, to $86.28 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.41 at 1:34 p.m. London time. The contract yesterday gained 12 cents to $88.93, the highest close since Aug. 3. Prices are up 1.2 percent this week and have gained 17 percent in the past year.

Brent oil for October settlement was at $112.01, down $2.28, on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $25.68 to U.S. futures, up from $25.58 at yesterday’s settlement and compared with a record close of $26.21 on Aug. 19.

U.S. Payrolls Stagnate

Payrolls were unchanged last month, the weakest reading since September 2010, after an 85,000 gain in July that was less than initially estimated, Labor Department data showed today in Washington. The median forecast in a Bloomberg News survey called for a rise of 65,000. New York oil dropped 7.2 percent last month amid speculation the U.S. economy is slowing.

“Demand out of the U.S. is pretty flat at the moment,” said Gavin Wendt, founder of Mine Life Pty., an energy and mining analyst based in Sydney. “The fear that supplies are going to be impacted can increase the risk premium that’s associated with crude.”

Storm Shuts Production

The tropical depression in the Gulf of Mexico was about 240 miles (385 kilometers) southwest of the Mississippi River mouth, moving northwest at about 2 miles per hour with maximum winds of 35 mph, the Miami-based NHC said in an advisory issued before 5 a.m. East Coast time. The system may become a tropical storm today before reaching Louisiana this weekend.

About 5.7 percent of Gulf oil production and 2.4 percent of natural gas output has been shut, according to the Bureau of Ocean Energy Management, Regulation and Enforcement. The Gulf accounts for 27 percent of U.S. oil output and 6.5 percent of natural gas production.

BP is evacuating all personnel at platforms in the Gulf of Mexico, according to a message on the company’s hurricane hot line. Anadarko Petroleum Corp. removed workers from its Gulf facilities and is shutting output at eight operating platforms.

Royal Dutch Shell Plc said it was evacuating employees from most operations and has shut in some production, mainly from subsea fields. Exxon Mobil pulled 140 workers from platforms and shut in 11,000 barrels a day of liquids output.

Noble Corp. took about 300 workers from three of five active rigs in the Gulf. ConocoPhillips evacuated all workers and shut in output from the Magnolia platform, which averaged daily production of 5,000 barrels of oil equivalent last year.

In the Atlantic, Tropical Storm Katia was 750 miles east of the northern Leeward Islands and moving west-northwest at almost 15 mph, the NHC said. Maximum sustained winds were unchanged at 70 mph, according to the center.

“Little change in strength is expected today, but Katia could become a hurricane again over the weekend,” the center said in the statement.

--With assistance from Ann Koh in Singapore and Robert Willis in Washington. Editors: John Buckley, Rob Verdonck

To contact the reporters 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 at sev@bloomberg.net


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