This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Oil Prices Sour on Deflating Jobs Data

NEW YORK ( TheStreet) -- Oil prices were sinking on poor jobs data after the previous day's spate of upbeat economic reports drummed up optimism.

"Nonfarm payrolls just came in with an absolutely horrendous set of numbers," Summit Energy analyst Matt Smith said. "Crude immediately sells off, the dollar strengthens, equities tank, the bond market is on fire, and risk aversion is game-on."

West Texas Intermediate light sweet crude oil (WTI) for August delivery was surrendering $2.67 to $96 and the September Brent crude contact was slumping by $1.34 to $116.77.

Also weighing on the markets Friday was heightened discussions about the U.S. debt ceiling, as the country scrambles to prevent a default at the start of August; and traders taking profits.

"Crude oil fell ... as traders booked some profits after yesterday's surge that was triggered by the unexpectedly upbeat private payroll report from ADP," said Addison Armstrong, senior market research director, Tradition Energy.

Positive jobs sentiment turned sour on Friday as the Bureau of Labor reported that the economy added just 18,000 new jobs in June, while the unemployment rate inched up to 9.2%. The essentially unchanged number of jobs was a big disappointment given that consensus estimate predicted a 125,000 increase, according to The market was expecting unemployment to stick at 9.1%.

On Thursday, the Department of Energy (DOE) reported a smaller-than-expected decline in weekly crude inventories. They fell 900,000 barrels to 358.6 million vs. the general forecast for a decline of 2.4 million barrels. Gasoline supplies fell 600,000 barrels to 212.5 million -- the projection was for a 900,000 barrel increase. Distillate stocks fell by 200,000 barrels to 142.1 million, when the expectation was for a 200,000 barrel increase. Refiners increase utilization 0.3 percentage points to 88.4% capacity.

This report compared bearishly to the American Petroleum Institute's weekly report the day before.

"This actually argues against rising prices," said Commerzbank analyst Carsten Fritsch.

But "even more remarkable than the price rise itself is the renewed widening of the price differential between Brent and WTI. Despite yesterday's DOE report that crude oil inventories in Cushing fell by another 460,000 barrels, the spread increased again to nearly $20 per barrel."

According to Fritsch, inventories at Cushing, Okla. have declined by more than 10% since early May alone and are already 4.5 million barrels lower than the record high reached in early April. He expects the price differential to disappear by 2013 at the latest, when TransCanada's (TRP) plans to extend the pipelines from Canada to Cushing all the way to the U.S. gulf coast are realized.

Natural gas prices were rebounding by 1.3% to 4.186 per million British thermal units on forecasts for hot weather in the central U.S., according to Armstrong. Thursday's much bigger than expected storage injection report has pushed natural gas into negative territory the day before.

Oil and gas stocks were trading mixed. Comstock Resources (CRK - Get Report) was slumping by 1.6% to $29.31, Quicksilver Resources (KWK) was losing 1.6% to $14.26, Double Eagle Petroleum (DBLE) was popping by 5.6% to $10.26, Kodiak Oil & Gas (KOG) was surrendering 2.3% to $6.36, Magnum Hunter Resources (MHR) was down 2.4% to $6.90, Chevron (CVX - Get Report) was falling 1.1% to $105.42 and Royal Dutch Shell (RDS.A - Get Report) was down 1% to $72.40.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.
Copyright 2011 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
KWK $0.00 0.00%
KOG $6.56 0.00%
MHR $0.15 0.00%
DBLE $1.19 0.85%
CRK $1.13 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs