Oil prices drop after disappointing jobs report

[January 08, 2011]  NEW YORK (AP) -- Oil prices fell to about $88 per barrel Friday after the government reported that the U.S. economy continues to add jobs, although not at the pace many experts hoped for.

The economy gained 103,000 jobs in December and figures for October and November were revised upward. More jobs means more cars will join the morning commute, and that usually boosts gasoline consumption in the U.S. But drivers are expected to stay closer to home this month as severe winter weather sweeps across the country.

Retail pump prices added less than a penny overnight to a new national average of $3.08 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular is 11.5 cents more expensive than a month ago and about 37 cents higher than it was last year.

Oil had been rising, increasing 22 percent from Labor Day through the end of the year. It hit a two-year high on the first trading day of 2011 before dropping in the second half of the week.

Traders have grown cautious in January. For more than a year, oil stayed in a relatively stable range of about $70 to $80 per barrel. It appears that even bullish forecasts from investment banks couldn't keep them buying at above $90 per barrel.

"All this happened so fast, just a few weeks," said Tom Kloza, chief analyst at the Oil Price Information Service. "They hit a speed bump."

Benchmark crude for February delivery fell 30 cents to settle at $88.03 per barrel on the New York Mercantile Exchange. Prices ended the week at the lowest level since Dec. 17.

Analyst Peter Beutel blamed the price drop on concerns about growing supplies and the rise of the dollar against other major currencies. Oil is priced in dollars, and becomes more expensive for investors holding foreign currency as the dollar gets stronger.

Despite the recent drop in oil prices, many experts think the price of a barrel will pass $100 this year, pushing up gasoline prices as the spring driving season approaches.

OPIS said that if gasoline follows historic trends, pump prices should rise to more than $4 per gallon in at least 15 states by Memorial Day.

In other Nymex trading for February contracts, heating oil fell 2.49 cents to settle at $2.4863 per gallon, and gasoline dropped 2.99 cents to settle at $2.4131 per gallon. Natural gas gave up 1.2 cents to settle at $4.422 per 1,000 cubic feet. In London, Brent crude lost $1.19 to settle at $93.33 per barrel.

[Associated Press; By CHRIS KAHN]

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