Concerns that economic growth in the US may be slowing prompted a sell-off in commodity markets, pushing crude oil futures down by more than US$2 per barrel late in Friday’s sessions.
Traders were worried that economic growth in the US is winding down after yesterday’s non-farm payrolls data showed that the US economy added the smaller number of jobs in nine months in June.
Oil and metal prices rallied on Thursday after jobless claims figures and a private sector employment report from payroll provider ADP suggested that the job market in the US was in better shape than thought.
The Labor Department said that the number of initial applications for unemployment benefits fell 14,000 to 418,000 last week, while data from ADP revealed a gain of 157,000 in private payrolls.
Analysts expected Friday’s payrolls report to show a gain of over 100,000 following Thursday’s better than expected jobs figures.
However, the payrolls data showed that the economy added just 18,000 jobs last month, while the unemployment rate rose from 9.1 percent in May to 9.2 percent in June, the highest level in 2011.
The jobs figures put more pressure on crude futures in addition to Thursday’s official US inventories report from the US government, which also fell short of expectations.
The research arm of the US Department of Energy said that the market was very well supplied as crude oil stockpiles in the US remained at near record levels at 358.6 million barrels after shedding 889,000 barrels last week.
Analysts polled by Bloomberg expected to see a decrease of 2.5 million barrels.
Meanwhile, the world’s second largest energy consumer behind the US, China, could see its own oil consumption decline after the government announced its third rate hike this year on Wednesday.
The Chinese government upped its rates by 25 basis points in an attempt to curb inflation and prevent the rapidly growing economy from overheating.
The move followed statements from China’s central bank that inflationary pressures in the economy remained high.
Reports in Chinese media said that growth in consumer prices accelerated from 5.5 percent in May to 6.2 percent in June.
Despite concerns that demand won’t rise as much as expected, analysts remain bullish on oil.
This week, Goldman Sachs warned that oil supplies will be critically tight next year. The investment bank said that Saudi Arabia does not have as much spare production capacity as thought and may not be able to meet growing demand in 2012.
US light, sweet crude for August delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), ended Friday’s session at 96.20/barrel.
August Brent crude closed at US$118.30/barrel on the ICE Exchange on Friday.
Oil and gas companies were headed in different directions this week.
BP (LON:BP) was unchanged from a week ago at 458 pence. Fellow supermajor Royal Dutch Shell (LON:RDSB) rallied from 2,238 pence last Friday to 2,272 pence.
Tullow Oil (LON:TLW) advanced from 1,252 pence to 1,303 pence.
Cairn Energy (LON:CNE) fell from last week’s close of 418 pence to 404 pence and BG Group (LON:BG) declined from 1,427 pence to 1,412 pence.