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Oil dips below $100 on dismal US data

Published: 14:30 05 May 2012 BST

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Oil prices fell sharply this week with the West Texas Intermediate (WTI) in the US shedding six percent and slipping below US$100 per barrel under pressure from dismal US economic data and another surge in oil inventories.

On Friday, the highly anticipated non-farm payrolls report from the Department of Labor revealed that the US economy created only 115,000 jobs last month. This was far below expectations as a Bloomberg News survey projected a gain of 165,000, while analysts at Goldman Sachs expected US payrolls to increase by 125,000.

In a positive note, the unemployment rate fell to 8.1 percent from 8.2 percent, while the March estimate was revised up from an increase of 120,000 to 154,000.

On Thursday, official jobless claims data showed a surprising drop in initial applications for unemployment benefits, which fell 27,000 to 365,000 last week.

However, the drop in weekly unemployment claims was taken with a grain of salt as the less volatile four week moving average reached a five month high, rising 750 to 383,500.

This week’s European economic data wasn’t much better.

Markit said on Wednesday that that manufacturing activity in Germany contracted at the fastest pace since June 2009.

The PMI index for the euro zone’s largest economy dropped to 46.2 from 48.4 in March, while the gauge for the euro zone dipped to 45.9 from 47.7, which was the lowest reading in more than two years.

A separate report showed that unemployment within the 17-member monetary union hit an all time high of 10.9 percent in March compared with 9.9 percent a year earlier.

In the meantime, the Department of Energy reported on Wednesday that oil stocks in the US added 2.84 million barrels last week, which was a bigger gain than expected, to reach 375.86 million barrels. 

US light, sweet crude for June delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), ended the week at US$98.49/barrel.

June Brent crude closed at US$113.20/barrel on the ICE Exchange on Friday.

Shares in oil and gas majors were in decline this week.

BP (LON:BP.) dropped from 446.06 pence to 423.67 pence, while fellow supermajor Royal Dutch Shell (LON:RDSB) slipped from 2,261.5 pence to 2,215 pence.

Cairn Energy (LON:CNE) fell from 344.35 pence to 334.72 pence, Tullow Oil (LON:TLW) dropped from 1,547 pence to 1,521 pence and BG Group (LON:BG.) retreated from 1,446.7 pence to 1,359 pence.

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