Oil falls toward $70 after jobs report
Written on February 10, 2010
Oil prices fell Friday after a mixed report on the employment picture.
What prices are doing: Crude oil for March delivery fell $1.95 to settle at $71.19 a barrel Friday.
Oil had rallied at the beginning of the week, gaining nearly 6% on expectations that inventory would fall more than expected.
But a slight dip on Wednesday was followed by a 5% price drop on Thursday after a government inventory report showed a surprise build in supplies. Over the course of the week, oil prices fell $3.24, or 4%.
A research note from Deutsche Bank noted that commodities across the board "have been unable to escape the widespread correction occurring across ‘risky’ asset classes this week."
In addition to pushing crude lower, Thursday’s trading session also sent gold prices and stock indexes down.
The Deutsche Bank note added: "We believe the more skittish financial and economic outlook will enhance the appeal of defensive commodity strategies."
What’s driving prices: In its monthly report on employment, the Labor Department said 20,000 jobs were lost in January even though the unemployment rate fell to 9.7% from 10% in December.
Economists had forecast an increase of 15,000 jobs in January and expected the unemployment rate to remain steady at 10%.
Investors are also becoming increasingly worried about growing debt abroad, which could push oil lower.
What analysts are saying: "Concern about Greece and other countries in Europe all just points to demand weakness," said James Williams, president and energy economist at WTRG Economics.
"Through the spring, the pressure will be downward," he added. "It’s low demand season and the economies of the world are clearly not recovering at any great pace." He said prices may slip as low as $60 a barrel this year on lower demand and ample inventory.
The Deutsche Bank research note said crude prices have been able to stay strong amid "an environment of rising risk aversion," but that resilience will likely not persist.
"A period of stronger oil prices is unlikely to be sustainable until global oil demand, including gasoline demand in the U.S., gets on more solid footing," the note said. It added that domestic oil demand in January 2010 was 2% below year-ago levels.
Filed in: money.