Oil falls below $109 on US economy concerns
Oil prices fell below $109 a barrel today in Asia, extending a week-long sell-off on investor concern that slowing US economic growth will undermine crude demand.business Updated: May 05, 2011 10:16 IST
Oil prices fell below $109 a barrel on Thursday in Asia, extending a week-long sell-off on investor concern that slowing US 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 US economic growth is faltering.
The Institute for Supply Management said on 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 on 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 Muammar Gaddafi, 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.