Oil prices drop at fastest rate in two years amid rapid sell-off
LONDON (AFP) – The plunge in oil prices accelerated on Friday, as dealers became nervous about the release of US jobs data later in the day, analysts said.
Both main global contracts had posted gains in the morning as bargain hunters stepped in following Thursday’s sell-off that saw New York crude dive at its fastest pace in two years.
New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in June, slumped as low as $94.63 in London trade after losing more than eight percent to $99.80 Thursday, the first time it had fallen below $100 since March 16.
Brent North Sea crude for delivery in June hit a low point of $105.15 a barrel in early London trade.
The WTI’s fall on Thursday was its heaviest since September 29, 2008, at the beginning of the global financial crisis, when prices plunged more than nine percent, analysts said.
Crude markets have been volatile ahead of the key US jobs report, which dealers are anxiously awaiting to shed light on the health of the world’s largest oil consumer, said Victor Shum, senior principal of Purvin and Gertz energy consultants in Singapore.
“It’s really the concerns about economic weakness and the market is really looking at the jobs data that’s going to be reported in the US,” he told AFP.
Traders were not holding much hope for good news after data earlier in the week showed US businesses adding jobs at a weaker-than-expected pace last month, Shum stated.
Payrolls firm ADP reported Wednesday that private companies added a seasonally adjusted 179,000 jobs last month, slowing from an upwardly revised 207,000 net new jobs in March.
Most analysts estimated nonfarm payrolls would grow by 200,000 in April.
And on Thursday the Labor Department said new jobless claims rose to 474,000 in the week ending April 30, a 10 percent increase from the prior week and an eight-month high.
Most analysts expected claims would fall, and the data raised fears that Friday’s report would be dismal.
“Earlier this week there was also a poor report of the non-manufacturing sector in the US… concerns about the economic weakness continues to weigh on the markets,” he added.
Phillip Futures investment analyst Ong Yi Ling said crude prices would slump even more “if there is a surprise on the downside” from the report.
Prices were also pushed down by a stronger dollar, which gained against the euro after European Central Bank president Jean-Claude Trichet suggested the lender was growing more dovish on interest rates, Shum added.
“What triggered the sell-off was really the strong US dollar versus the euro when the ECB indicated the bank would not raise interest rates in the eurozone,” he said.
“That caused the US dollar to make big gains against the euro.”
A stronger greenback makes dollar-priced crude more expensive to traders using other currencies.