OIL prices fell yesterday after the US government said worker productivity fell sharply in the first three months of the year.
The labor market has been on traders' minds all week; the big April jobs report is due out today.
Benchmark crude for June delivery dropped US$2.68, or 2.5 percent, to settle at US$102.54 per barrel on the New York Mercantile Exchange. Brent crude lost US$2.12 to end at US$116.08 a barrel in London.
In another report yesterday, US service companies, which employ roughly 90 percent of the work force, expanded more slowly in April. Companies saw less growth in new orders and hired at a weaker pace.
A slowing global economy and rising unemployment in Europe, coupled with growing US crude stockpiles, are weighing on oil prices, reviving concerns about a drop in demand.
Analysts noted that US oil supplies have hit a 22-year high in Cushing, Oklahoma, where benchmark West Texas Intermediate crude is delivered. And world oil supplies could be rising as well.
Reuters reported yesterday that OPEC is producing 2.3 million barrels per day above its targets in an effort to push international oil prices back toward US$100 per barrel.
"The demand picture just isn't very good," said Peter Donovan, a broker with Vantage Trading.
Crude has traded between US$102 and US$106 for most of the last month as traders weigh a slowly recovering US economy against signs of weakening growth in Europe and Asia. On Wednesday, a survey showed that European manufacturing is slowing down and the unemployment rate in the 17 countries that use the euro rose to 10.9 percent in March.
The New York Mercantile Exchange also made it more expensive for some traders to buy commodity contracts.
The CME Group, which owns the Nymex, said new federal trading rules directed it to increase the amount of money that certain speculative investors need on hand to buy futures contracts. The increase will likely undercut the amount of contracts they can buy, analysts said, and that tends to weigh on oil prices since a majority of speculative trades are bets that prices will rise.
In other energy trading yesterday, natural gas prices added 8.7 cents to US$2.34 per 1,000 cubic feet in New York.
Prices are rebounding from 10-year lows as supplies fall more in line with average levels for this time of year. The government's latest supply report says US natural gas supplies rose by 28 billion cubic feet last week, below the 30-34 billion cubic feet that analysts had expected.
Analysts warned earlier this year that a glut in natural gas was in danger of expanding to a point where the US would run out of places to put it. Natural gas producers such as Chesapeake Energy Corp., Encana Corp. and ConocoPhillips responded by shutting down some natural gas operations this year.
Supplies are still nearly 50 percent higher than average for this time of year, according to the Energy Information Administration. But they were more than 60 percent above average earlier this year.
In other futures trading, heating oil gave up 5.56 cents to finish at US$3.0869 per gallon while wholesale gasoline lost 2.57 cents to end at US$3.05 per gallon.
Source:shanghaidaily.com