SINGAPORE (AP) - Oil prices fell below $109 a barrel Thursday in Asia, extending a week-long sell-off on investor concern that slowing U.S. economic growth will undermine crude demand.
Benchmark crude for June delivery was down 50 cents at $108.74 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost $1.81 to settle at $109.24 on Wednesday. In London, Brent crude for June delivery was down 30 cents to $120.89 a barrel on the ICE Futures exchange. Crude has fallen from a 2 1/2-year high above $114 late last week as traders eye signs U.S economic growth is faltering.
The Institute for Supply Management said Wednesday its service sector index rose at the slowest pace in eight months in April, while private payroll processor ADP reported that 179,000 new private sector jobs were added in April, far fewer than economists expected.
The government is scheduled to announce April non-farm payroll numbers Friday. "Employment seems unlikely to increase by as much as it needs to for sustainable economic growth," Cameron Hanover said in a report. "The major assets that have been the focus of investor buying for so long have lost some luster."
Fighting between rebels and forces loyal to Libyan leader Moammar Gadhafi, which has shut down almost all of the country's 1.6 million barrels a day of crude output, has ground to a stalemate in recent weeks. A resolution of the conflict and resumption of oil production would likely trigger a sharp drop in crude prices, analysts said.
"The ongoing civil war in Libya and unrest elsewhere in the Middle East has added a risk premium of around $30 to a barrel of crude," Capital Economics said in a report. "We expect the risk premium to fade as and when the Libyan crisis eases, helping to drag prices back within OPEC's $70 to $90 range by year-end."
In other Nymex trading in June contracts, heating oil fell 0.3 cent to $3.14 a gallon and gasoline dropped 1.2 cents to $3.31 a gallon. Natural gas futures were down 2.1 cents at $4.56 per 1,000 cubic feet.
Earlier report
Oil price falls on supply increase and weak demand
NEW YORK: Oil dropped below US$110 per barrel Wednesday after a government report showed that supplies of petroleum products are growing as demand weakens in the U.S.
Industry reports on the job market and the service sector also raised concerns about the health of the U.S. economy.
Benchmark crude for June delivery lost $1.81 to settle at $109.24 per barrel on the New York Mercantile Exchange. In London, Brent gave up $1.26 to settle at $121.19 per barrel on the ICE Futures exchange.
Prices fell shortly after the Energy Information Administration said that oil supplies increased by 3.4 million barrels last week - twice as much as energy analysts expected. The government also reported that gasoline demand averaged 9.1 million barrels per day, down almost 2 percent from a year ago.
Crude has been climbing over the past few months as unrest in North Africa and the Middle East raised concerns about oil supplies and a weaker U.S. dollar made crude cheaper for investors holding foreign money. Still, economists warned that higher energy prices were taking a toll on the economy, and recent government and industry surveys suggest that American drivers are buying less fuel.
In its weekly report, MasterCard SpendingPulse said the four-week average of gasoline purchases in the U.S. dropped for the sixth consecutive week, compared with a year ago. EIA said the four-week average of wholesale gasoline demand also dropped for the sixth straight week.
So far the drop in consumption hasn't kept pump prices from rising. Gasoline has increased for 43 days straight, hitting a national average of $3.982 per gallon (3.79 liters) on Wednesday, according to AAA, Wright Express and Oil Price Information Service. Pump prices have risen 91 cents per gallon since the beginning of the year. A gallon of regular now costs more than $4 in 13 states and Washington, D.C.
Lackluster economic news also helped push oil prices down Wednesday. The Institute for Supply Management said its service sector index rose at the slowest pace in 8 months in April, as many companies expressed concerns about higher food and gas prices. Private payroll processor ADP also raised worries about the health of the jobs market when it reported that 179,000 new private sector jobs were added in April, far fewer than economists expected.
In other Nymex trading for June contracts, heating oil lost 4.78 cents to settle at $3.143 per gallon and gasoline futures fell less than a penny to settle at $3.3225 per gallon. Natural gas gave up 9.4 cents to settle at $4.644 per 1,000 cubic feet (28.32 cubic meters). - AP
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