Crude oil prices weaken at end of volatile week

LONDON
Petroleumworld.com, Feb 05, 2010

World oil prices fell on Friday in the wake of weaker-than-expected US jobs data and at the end of a volatile week for global financial markets.

New York's main futures contract, light sweet crude for delivery in March, lost 34 cents to 72.80 dollars a barrel.

London's Brent North Sea crude for March dropped 69 cents to 71.44 dollars per barrel.

A much-awaited US jobs report on Friday gave a mixed picture on the troubled labor sector that is key to sustainable economic recovery in the world's biggest energy consuming nation.

US employers cut 20,000 jobs in January, the Labor Department reported, surprising most analysts, who had forecast a gain of 15,000.

The report also showed the unemployment rate eased to 9.7 percent from 10.0 percent in December.

"The January payroll employment figures were somewhat weaker than the consensus estimate, but the decline in the unemployment rate was larger than expected," said Calyon analyst Michael Carey.

Oil had also fallen in earlier trade amid slumping equities and a stronger dollar caused by European debt fears.

Crude futures had slumped nearly four dollars on Thursday, mirroring plunging global stock markets, as the dollar strengthened after a surprise rise in US initial weekly jobless and a deepening debt crisis in Europe.

Global equities tumbled further on Friday and the euro hit a near nine-month dollar low as investors ran for cover on fears that soaring European state debt could damage a fragile economic recovery.

Investors are nervous about Greece's plans to rein in its public deficit which has pushed the eurozone into a crisis about the impact of a potential sovereign debt default.

The euro bounced back above 1.37 dollars on Friday after the US jobs data, having earlier struck a near nine-month low at 1.3648 dollars as risk-averse investors moved into the safe-haven greenback.

A stronger US unit makes dollar-priced crude oil more expensive for buyers using weaker currencies -- which in turn tends to dent demand and in turn prices.

"The price of oil fell ... as traders continued to flee the euro and buy up the US dollar," said ODL Securities analyst Marius Paun.

"Given the inverse relationship between the dollar and oil, this added some downside pressure but the big story remains the health of the Greek economy.

"Concerns over sovereign debt have pushed global equity markets lower, which in turn has dented investor confidence in terms of future demand," Paun added.

Earlier this week, oil prices had soared as equity markets put in strong performances and manufacturing data from the United States reassured nervous investors.

The market was also pushed higher by news of fresh unrest in Nigeria's key oil-producing region.

Prices began sinking on Wednesday as the market reacted to a surprise jump in oil inventories in the United States, the world's biggest energy consumer.

Story from AFP
AFP 02/05/2010 16:01

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