Oil slips to near $71 ahead of US jobless data

[August 07, 2009]  LONDON (AP) -- Oil prices fell to near $71 a barrel Friday as investors looked to U.S. monthly employment figures due later in the day for signs the economy may be recovering.

By midday in Europe, benchmark crude for September delivery was down 70 cents to $71.24 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract lost 3 cents to settle at $71.94.

Investors will be eyeing figures on job losses for a sense of the health of the U.S. economy. Traders have bid up crude from below $62 a barrel last week on expectations the economy could grow by the end of the year.

"Renewed investor hopes of an early recovery in the global economy have led to a sharp rebound in equities and oil prices," said a report from KBC Market Services in Britain.

Oil prices have held above $71 for the last few days despite an Energy Department report this week that showed crude supplies continue to rise, a sign demand remains weak.

"Once again this has led to disregard of persistently weak oil market fundamentals. There are major overhangs of crude and middle distillates in both onland stocks and floating storage," KBC said.

"A much tougher test of the oil market's resiliency as an asset class will be the release of the monthly employment data," said Jim Ritterbusch of Ritterbusch and Associates in Gelana, Illinois.

Labor Department data due out Friday is expected to show job losses slowing in July to a pace of around 320,000 -- the slowest pace since August 2008 -- with unemployment rising to 9.6 percent, up from 9.5 percent in June.

JBC Energy in Vienna said a buildup of stocks in Cushing, Oklahoma, was behind the spread between the Nymex and Brent contracts, which was around $3 in favor of Brent on Friday.

"Inventories have built by roughly 5 million barrels in the last six weeks, bringing the total level to around 33 million barrels," JBC said.

Stocks in Cushing feed a number of major refineries and is also where oil traded on Nymex is stored.

"This has caused (Nymex) to become disconnected from the global crude market which has seen the spreads of crudes priced off the North American benchmark shoot up," JBC said.

In other Nymex trading, gasoline for September delivery fell 1.38 cents to $2.0469 a gallon and heating oil dropped 1.17 cents to $1.9250. Natural gas for September delivery lost 0.9 cent to $3.734 per 1,000 cubic feet.

In London, Brent prices fell 55 cents to $74.28 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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