Oil down nearly 3 percent despite storm

[September 03, 2011]  NEW YORK (AP) -- Oil prices fell Friday along with the prospects for global economic growth as the government reported the economy added no jobs last month.

Benchmark crude fell $2.48, or 2.8 percent, to finish at $86.45 after the Labor Department said employers stopped adding jobs in July. The unemployment rate remained at 9.1 percent.

The U.S. jobs report follows a weak manufacturing report from China and concerns that the lingering debt crisis in Europe continues to hold back economic growth there.

Put together, concerns are growing that the global economy is weakening. A weak economy reduces demand for oil and oil products such as diesel, jet fuel, and gasoline because fewer goods are shipped and people travel and commute less.

"We were doomy and gloomy before the jobs report and then the jobs number became the crescendo of all the bad news," said Phil Flynn, an analyst at PFGBest. "The big story is the global economic slowdown."

Brent crude, used to price oil in many international markets, fell $1.96 to end at $112.33 per barrel In London.

Gasoline prices remained high, however. The average retail price for gasoline in the U.S. rose about 2 cents on Friday to $3.647 per gallon according to AAA, Wright Express and Oil Price Information Service. That's the second highest level ever for this time of year. It was a little higher in 2008.

Oil was also pushed down as the dollar rose against the euro and some other currencies. Oil is priced in dollars and becomes more expensive to buyers with foreign currency -- and less attractive -- as the dollar get stronger.

Also, a Libyan official said Friday that five foreign oil and gas companies have returned to Libya to resuscitate production choked off by civil war and sanctions.

This encouraged traders that Libyan oil might begin flowing sooner than hoped, though most expect it to be several months before significant exports resume.

Concerns about the economy, the dollar and increased supply from Libya overwhelmed worries that the interruptions of oil and gas production caused by Tropical Storm Lee in the Gulf of Mexico might squeeze supplies and push prices higher.

The storm has forced several oil companies to evacuate personnel from production platforms and drilling rigs in the region. Nearly half of the Gulf's oil production has been cut off, as well as one-third of the region's natural gas production, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.

Forecasters expect the storm to dump a foot or more of rain on parts of Louisiana starting this weekend.

"Several days of decreased oil and gas production and major inland flooding are clear concerns with this system," said Bob Haas, Weather Operations Manager and Meteorologist at MDA EarthSat in a report.

The storm is not expected to damage rigs in the region, however. Oil production should resume shortly after the storm has cleared and companies can return workers to production platforms.

In other energy trading, heating oil fell 5.44 cents to finish at $2.9974 per gallon and gasoline futures lost 5.31 cents to finish at $2.8396 a gallon. Natural gas fell 17.8 cents, or 4.4 percent, to end the day at $3.872 per 1,000 cubic feet.

[Associated Press; By JONATHAN FAHEY]

Jonathan Fahey can be reached at http://twitter.com/JonathanFahey.

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