Bloomberg News

Oil Falls on Sluggish U.S. Employment Growth, Iran Talks

April 09, 2012

Oil declined as an employment report added to speculation that U.S. fuel demand will slow and Iran agreed to resume talks on its nuclear program.

Futures fell 0.8 percent after the Labor Department said April 6 that the U.S. created 120,000 jobs in March, below the median forecast of 205,000 in a Bloomberg survey. Negotiations between Iran and the United Nations Security Council members plus Germany are scheduled to start April 14, adding to confidence that global supplies won’t be disrupted.

“Friday’s poor jobs numbers are raising concerns with regard to future economic activity,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “The jobs number is having an exaggerated impact because we were closed on Friday. When you add the upcoming Iran talks, you have the makings of a big move lower.”

Crude oil for May delivery fell 85 cents to settle at $102.46 a barrel on the New York Mercantile Exchange. The contract touched $100.81, the lowest intraday level in more than seven weeks. Prices have climbed 3.7 percent this year.

Brent oil for May settlement dropped 76 cents, or 0.6 percent, to end the session at $122.67 a barrel on the London- based ICE Futures Europe exchange.

Commodity and equity markets were closed in New York and London on April 6 for Good Friday. Stock markets in Europe, Australia, New Zealand, Hong Kong, Thailand and South Africa were closed for holidays.

Light Volume

“Volume is very light because markets are shut in Europe, Australia and Hong Kong,” said Chris Dillman, an analyst and broker at Tradition Energy in Stamford, Connecticut. “This is probably exaggerating the size of moves.”

Electronic trading volume on the Nymex was 362,223 contracts as of 2:38 p.m. in New York. Volume totaled 494,088 contracts on April 5, 24 percent below the three-month average. Open interest was 1.56 million.

The U.S. employment increase was the smallest in five months. The data also showed the unemployment rate fell to 8.2 percent as people left the labor force, while workers put in fewer hours.

“Worries about the U.S. economy are coming back with last Friday’s employment numbers,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “All of the markets are moving together today on economic worries. A test of $100 looks likely.”

Equities, Commodities

Oil also declined with equities and other commodities. The Standard & Poor’s 500 Index was down 0.8 percent. The Standard & Poor’s GSCI Index of 24 commodities fell 0.6 percent.

Gasoline for May delivery declined 4.38 cents, or 1.3 percent, to $3.2967 a gallon in New York. It was the lowest settlement since March 15.

Iran and the representatives of the six nations will meet for nuclear talks starting April 14 in Istanbul, Michael Mann, a European Union spokesman, said yesterday. Their last meeting was in January 2011. The government in Tehran is under increasing economic pressure from trade, financial and energy sanctions, including U.S. penalties on banks that process payments for Iranian crude.

The Persian Gulf country’s Supreme National Security Council said in a statement today cited by the state-run Mehr news agency that a second round of talks will be held in Baghdad, the date of which will be announced at the end of the Istanbul meeting.

No Conditions

Iranian Foreign Minister Ali Akbar Salehi said today that he won’t accept conditions before the talks. His comment came after the New York Times, citing unidentified diplomats, reported that the allies plan to demand the immediate closing of a nuclear enrichment facility in central Iran.

Prices have dropped 7.3 percent since touching $110.55 a barrel in intraday trading on March 1, the highest level since May 2011, on concern that the tension over Iran’s nuclear program will affect global supplies.

Oil also fell on reports of inflation in China, where consumer prices rose 3.6 percent from a year earlier, according to the National Bureau of Statistics. That exceeded the median 3.4 percent estimate in a Bloomberg survey of 33 economists. Faster inflation may limit the government’s options to stimulate growth in the second-largest oil-consuming country.

U.S. crude oil inventories are at the highest level since June after rising 9.01 million barrels to 362.4 million in the week ended March 30, according to the Energy Department.

“You still have that huge supply build from last week hanging over the market,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Speculator Bets

Speculators reduced bullish bets on oil by the most in more than three months, according to the Commodity Futures Trading Commission’s Commitments of Traders report on April 6. Money managers cut net long positions, or wagers on rising prices, by 10 percent in the seven days ended April 3, for the biggest drop since Dec. 20, the report showed.

Hedge funds and other money managers cut bullish bets on Brent oil by 11,809 contracts in the week ended April 3, according to ICE. Speculative bets that futures and options combined will rise, outnumbered short positions by 139,074 lots, ICE said today in its weekly Commitment of Traders report.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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