"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
, 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
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.
was slumping by 1.6% to $29.31,
was losing 1.6% to $14.26,
Double Eagle Petroleum
was popping by 5.6% to $10.26,
Kodiak Oil & Gas
was surrendering 2.3% to $6.36,
Magnum Hunter Resources
was down 2.4% to $6.90,
was falling 1.1% to $105.42 and
Royal Dutch Shell
was down 1% to $72.40.
-- Written by Andrea Tse in New York.
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