Crude oil dropped after a report showed the US jobless rate at a 25-year high, adding to concern that fuel demand will slide further.
Oil fell as much as 2.1 per cent after the US Labor Department said the economy lost more than 650,000 jobs for a fourth consecutive month. On April 1, the Energy Department said the total daily fuel demand averaged over the past four weeks reached its lowest since October.
“If the turnaround in the economy isn’t going to happen as soon as people had hoped, then oil remains under pressure, and we’ll start testing the lows from the beginning of the year, back below $35,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
Crude oil for May delivery fell 86 cents, or 1.6 per cent, to $51.78 a barrel at 9:40 am on the New York Mercantile Exchange. Futures are down 16 per cent this year and 1.1 per cent for the week.
Unemployment jumped to 8.5 per cent from 8.1 per cent in February, the Labor Department said today. Employers cut 663,000 workers, bringing total losses since the recession began to 5 million, the biggest slump since World War II.
Total daily fuel demand was 18.9 million barrels in the four weeks ended March 27, down 4.4 per cent from a year earlier, according to the Energy Department.
The International Energy Agency was likely to trim its demand forecast in its next monthly report on April 10 because of declining global economic growth projections, Executive Director Nobuo Tanaka said yesterday in an interview with Bloomberg Television.
Crude rose 8.8 per cent yesterday, driven by the Group of 20 plan to foster global economic recovery.
Dollar strength
The dollar strengthened against the euro, dimming the appeal of commodities such as crude used to hedge against inflation. The US currency strengthened 0.5 per cent to $1.3397 per euro from $1.3461.
“After a big rally like yesterday’s, you have to expect some profit taking,” said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland. “When you look at the huge level of crude stocks and the market structure it’s difficult to justify crude oil prices above $55.”
Brent crude oil for May settlement lost 54 cents, or 1 per cent, to $52.21 a barrel on the London ICE Futures Europe exchange. The contract rose $4.31, or 8.9 per cent, to $52.75 a barrel yesterday.
Crude oil may trade between $47 and $53 a barrel in New York next week as US stockpiles increase and OPEC members reduce production to bolster prices.
