Oil Falls Below $66 After Bleak U.S. Jobs Data

Contrarian Profits — Fri, 03 Jul 2009 13:00:58 +0000

Oil dropped a dollar to below $66 a barrel today, Friday, after unemployment data hardened views economic weakness would sap energy demand and that last month’s rally was overdone.

In the latest sign the economy of the world’s top consumer was still struggling, data on Thursday showed U.S. employers cut 467,000 jobs in June and the jobless rate rose to a 26-year high. Euro zone unemployment climbed to a 10-year high.

“All the data was bad yesterday,” said Rob Montefusco, a trader at Sucden Financial. “Technically, it looks pretty weak at the moment.”

U.S. crude fell by $1.22 to $65.51 a barrel by 1718 GMT, extending the previous session’s nearly 4 percent drop. London Brent crude fell $1.35 to $65.30.

Friday’s trading volumes were thin as NYMEX floor trading was closed for the U.S. Independence Day holiday.

Oil prices have doubled from a low of $32.40 a barrel in December last year and they surged by 42 percent in the last quarter — the largest quarterly gain since 1990.

But some analysts had predicted the market’s rise above $70 in June could not be sustained as the economy and energy demand were still weak and oil inventories remained high.

The latest U.S. government data showed a bigger than expected increase in stocks of motor fuel ahead of the July 4 holiday weekend, typically a time of high demand as the peak of the U.S. summer driving season.

JP Morgan said in a report on Friday it expected oil prices to correct to about $60 a barrel or lower.

Technical analysts, who use past price moves to predict direction, were also taking a bearish view for the immediate term. They said the breach of the technical target of $66 added to the negative momentum on Friday.

“Risks are shifting for a downside correction toward $60 in the weeks ahead before the larger bull trend resumes,” Barclays Capital technical analysts said.

For the longer term, many forecasters and analysts have said there was a risk of a supply crunch that could drive prices much higher, following under-investment in new capacity during the current period of lower oil prices and limited credit.

The Organization of the Petroleum Exporting Countries has said prices needed to be around $75 to spur investment and it has lowered its output targets by 4.2 million barrels per day since last September to try to support the market.

OPEC’s higher level of discipline earlier this year surprised analysts. Earlier this year, it rose to a peak of around 80 percent of promised curbs, but as oil markets have recovered the group’s compliance has faltered.

Reuters latest survey pegged discipline at 72 percent, still far above the historical average of 60 percent.

LONDON, July 3 (Reuters)

Oil Hits a Four-month High

Contrarian Profits — Thu, 26 Mar 2009 18:10:56 +0000

Oil rose to the highest level in about four months above $54 a barrel on Thursday as expectations that economic stimulus packages might be working to offset the impact of high oil inventories.

U.S. light crude hit $54.66 a barrel, its highest price since Nov. 28, before easing to $53.60 by 1708 GMT. But it was still up by 87 cents, recovering from a decline of more than a dollar on Wednesday.

London Brent crude rose $1.18 to $52.93.

Oil derived some support from a rally in Asian shares, which rose to their highest in 11 weeks following upbeat U.S. economic data on Wednesday, although European shares fared lower.

Oil prices responded little to a set of gloomy U.S. government data, which showed the U.S GDP fell 6.3 percent, the steepest decline since 1983.

Recovering equities this week as well as a generally weaker U.S. dollar have helped to underpin oil but the rise could be short-lived because of weak fundamentals, analysts said.

“Oil stocks are still very high and if you look at the investment flows, volumes have been very light,” said Olivier Jakob of Petromatrix.

A weaker dollar makes commodities priced in the U.S. unit relatively cheap for holders of other currencies, which can attract investors.

Oil has fallen from highs above $150 last July as the global economic crisis dented energy demand but it has recovered from lows below $35 touched in December partly as a result of export curbs by the Organization of the Petroleum Exporting Countries.

There are signs prices are at least stabilising. A Reuters poll on Wednesday showed a consensus view of analysts that oil prices would average around $50 this year.

“We are seeing some optimism, we are seeing some return of risk appetite, both of which we have not seen for a while…” Mike Wittner, Societe Generale’s global head of oil Research, said. But he too pointed to the high inventories.

On Wednesday, U.S. government data showed an increase in crude oil stocks to their highest levels since 1993. The data also showed falling demand.

Source: March 26 (Reuters)

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Oil Falls Below $66 After Bleak U.S. Jobs Data

Oil Hits a Four-month High