Oil Falls to Under $85 after Weak U.S. Jobs Report
Oil prices extended losses and fell below $85 a barrel Monday as a dismal U.S. jobs report suggested demand for crude in the world's largest economy will drop.
By early afternoon in Europe, benchmark oil for October delivery was down $1.60 to $84.85 in electronic trading on the New York Mercantile Exchange. Crude fell $2.48 to settle at $86.45 on Friday.
In London, Brent crude for October delivery was down $1.14 at $111.19 on the ICE Futures exchange.
Trading volume was light because U.S. markets are closed Monday for the Labor Day holiday.
Crude has fallen since the Labor Department said Friday that U.S. employers stopped adding jobs in August and the unemployment rate remained at 9.1 percent.
Oil had risen from $76 on August 9, the low for the year so far.
"The oil market suffered a severe blow" from the jobs figures, energy consultant Ritterbusch and Associates said in a report. "It reinforced our longer term expectation for a price decline into new low territory."
U.S. gasoline demand during the summer driving season — from May 30 to Monday — fell 4.1 percent from a year earlier as prices rose 34 percent, according to estimates by Barclays Capital.
"Gasoline demand has been affected by higher prices and weaker GDP," Barclays said in a report.
Analysts said the threat of hurricanes disrupting oil activity in the Gulf of Mexico was helping to keep a floor under prices.
"Things may change by October when the storm season starts to recede, and with it, a key prop that is holding up oil prices," said Edward Meir from MF Global in New York.
Continued interest from financial speculators was also contributing to keep prices from falling to far.
"The oil market appears to be still too optimistic at present and be pricing in only a low likelihood of a recession in the U.S. or Europe," said a report from Commerzbank in Frankfurt, noting that positions betting on higher prices had risen recently.
Commerzbank said the Brent contract was likely to fall to near $110 in the coming months.
In other Nymex trading for October contracts, heating oil fell 2.27 cents to $2.9747 per gallon and gasoline futures dropped 3.89 cents to $2.8007 per gallon. Natural gas for October delivery gained 1.5 cents to $3.887 per 1,000 cubic feet.