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Oil edges down ahead of US employment data

Oil edges down ahead of US employment data
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First Published: Fri, Aug 07 2009. 09 00 AM IST
Updated: Fri, Aug 07 2009. 09 00 AM IST
Singapore: Oil edged down on Friday from a six-week high in the previous session, as markets awaited US July employment data later on Friday, a major indicator of how well the US economy is doing pulling out of recession.
Oil prices are heading for a fourth straight week of gains as an improvement in the economic mood boosts riskier assets and knocks the dollar, but with high crude inventories showing demand remains weak, investors will want to see further signs that economic growth is returning.
Stock markets, which have been closely correlated with oil recently, fell on Friday, with Japan’s Nikkei index down more than 1% as investors locked in profits ahead of US jobs data.
US light crude for September delivery fell 32 cents a barrel to $71.62 by 7:52am , having settled 3 cents down at $71.94 on Thursday, when lower US stocks and a stronger US dollar took prices off a six-week high of $72.42.
London Brent crude fell 27 cents to $74.56.
“It is economic data that is pushing the market up but demand is not so huge at the moment. Oil prices are too high from a fundamentals point of view,” said Ken Hasegawa, commodity derivatives sales manager at broker Newedge in Tokyo.
The US economy is expected to have lost 320,000 nonfarm payroll jobs in July, a hefty number but still an improvement over last month’s drop of 467,000, while the unemployment rate is expected to have risen to 9.6%.
Data will be released at 6:00pm.
A better-than-expected weekly US jobless claims report on Thursday failed to dampen concerns about the July jobs report.
Oil has more than doubled since the low $30s of this winter, having plunged there from a record near $150 in July 2008, but prices have yet to retrace a 2009 high of $73.38 hit on June 30 as US inventories and crude in floating storage remain high.
US crude stocks rose by a larger-than-expected 1.7 million barrels last week, according to the Energy Information Administration, leaving them a hefty 54.3 million barrels above year-ago levels.
Frontline, the world’s biggest independent oil tanker shipping group, said on Thursday around 50 very large crude carriers (VLCCs) were storing crude oil, particularly in the US Gulf and off Europe, amounting to about 100 million barrels.
Risks to the oil market from increased regulation were given teeth on Thursday when the US Federal Trade Commission said it would fine traders and companies up to $1 million a day if they manipulate oil markets.
“We continue to see sizeable risks to the downside for crude in the near-term as weaker demand for crude will add to already weak fundamentals for the complex,” said JP Morgan analysts in a weekly oil report.
“That said, our longer-term outlook is considerably more positive as the expected boost in demand for the second half of the year will begin to cut back on commercial inventories around the world.”
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First Published: Fri, Aug 07 2009. 09 00 AM IST
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