LONDON: Oil futures dropped more than $2 on Friday after data showed US job growth had ground to a halt, adding to evidence of economic weakness that could limit fuel demand in the world’s biggest crude consumer.
By 1309 GMT, Brent was trading $2.41 lower at $111.88 and US crude was $3.04 lower at $85.89, just off a session low of $85.69.
Selling on Friday gathered momentum after keenly anticipated US jobs data at 1230 GMT showed non-farm payrolls were unchanged and data for previous months had been revised downwards.
"It points to a very, very low recovery," said Eugen Weinberg, commodities analyst at Commerzbank.
"If we get more of this kind of data, more monetary stimulus is becoming more probable."
Another round of stimulus in the United States could send the dollar weaker. That could spur buying in dollar-denominated commodities, such as oil, that become cheaper for non-dollar buyers and offer an outlet for investment class money.
On Friday, however, the prime focus was the implications for weak fuel demand as unemployment, stuck at 9.1 percent, limits US spending power.
"It is a seriously bad number," said Thorbjoern Bak Jensen at consultancy Global Risk Management.
"For oil prices, it is an ambiguous matter as the lower prospects should send oil lower while the outlook for quantitative easing is the opposite. Currently, it seems the lower growth prospects are the winning side of the matter."
The possibility of storm disruption to oil and gas infrastructure in the United States did little to stem the sell-off.
Tropical Depression 13, which formed over the central Gulf of Mexico, was almost at a stand-still, the US National Hurricane Center said.
It has forced major oil and gas producers to shut down platforms and evacuate workers.
The market is so focused on the prospect of dwindling demand, supply disruption would have to be extremely significant to have an impact, traders and analysts said.
Any disruption of exports from small exporter Syria as a result of EU sanctions agreed on Friday was unlikely to be enough to give oil prices upward momentum.
At the same time, the toppling of Libya’s Muammar Qaddafi has rekindled the debate about how quickly the OPEC member’s more significant production can return to international markets.
The newly-appointed chairman of Libya’s National Oil Corporation said this week the country’s oil production could restart within weeks and reach full pre-war output within 15 months, but Gaddafi has vowed to prevent oil exports.
As US crude futures took the US jobs data especially bearishly, their discount to Brent headed back above $26 a barrel, close to a record of $26.69 on Aug. 19, according to Reuters data.
So far Brent could still rack up a second weekly gain, as it recovers from a six-month low struck in early August of less than $100 a barrel. –Additional reporting by Florence Tan in Singapore and Ikuko Kurahone in London
