Oil plunges to 8-month low on weak US jobs report


THE price of oil plunged to eight-month lows below US$82 a barrel yesterday as a weak U.S. jobs report sparked a global selloff in stocks and commodities.

By early afternoon in Europe, benchmark oil for July delivery was down US$1.08 to US$82.15 per barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, the contract briefly traded at US$81.21, the lowest since October, while on Friday it lost US$3.30.

In London, Brent crude for July delivery was down US$1.70 at US$96.73 per barrel on the ICE Futures exchange, the lowest since January 2011.

The Labor Department said Friday that employers in the US added just 69,000 jobs in May, the fewest in a year and well below what economists expected. The unemployment rate rose for the first time since last June, up to 8.2 percent from 8.1 percent.

Energy trader and consultant The Schork Group in a report to clients called the employment report "mind-numbingly bad".

It was the third month in a row that US jobs growth has disappointed, suggesting the economy is slowing and oil demand will likely increase less than expected this year.

Crude has plummeted 23 percent in the last month amid signs of weak global economic growth. As Europe struggles to contain its debt crisis, signs of sputtering Chinese growth have coupled with a faltering US recovery to undermine investor confidence.

Oil traders often look to global stock markets as a barometer of overall investor sentiment, and Asian and European equities were mostly lower yesterday after the Dow Jones industrial average plunged 2.2 percent Friday.

Sustained lower crude prices should eventually bring down the cost of oil products such as gasoline, freeing up cash for consumer spending. The slump in commodities prices should also ease global inflation pressure and give policymakers more leeway for fiscal or monetary stimulus measures.

"The recent drop in commodity prices acts as a monetary lever loosening conditions," said Sean Darby, a strategist with Jefferies Group. "In particular, this will benefit emerging markets which should be able to cut interest rates further."

A stronger dollar also contributed to the drop in oil prices by making crude more expensive for traders using other currencies.

Yesterday the euro was down to US$1.2420 from US$1.2424 late Friday in New York. The dollar rose to 78.10 yen from 78.08 yen.

"Poor economic data from the US and China, plus the sovereign-debt crisis in the eurozone, are causing the US dollar to appreciate and are putting equity and therefore also commodities markets under pressure," said analysts at Commerzbank in Frankfurt. "In the near future there is no end in sight to the downward spiral."

In other energy trading, heating oil was down 3.48 cents at US$2.5931 per gallon while gasoline futures fell 3.11 cents at US$2.6257 per gallon. Natural gas gained 5.5 cents at US$2.381 per 1,000 cubic feet.


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