MD: Oil drops to below $98 in Europe amid signs of weakening US demand
Oil prices continued a three-day slide and fell below US$98 a barrel Monday as a slowdown in U.S. hiring and election results in Europe dimmed expectations of stronger economic growth.
By early afternoon in Europe, benchmark West Texas Intermediate crude for June delivery was down 75 cents at US$97.74 a barrel in electronic trading on the New York Mercantile Exchange.
Earlier in the session, the contract fell to a low of US$95.34 before paring losses after having plunged $4.05 to settle at US$98.49 on Friday.
In London, Brent crude was down 20 cents at US$112.98 a barrel on the ICE Futures exchange.
Crude has slumped from $110 in February amid signs oil demand may be weaker than previously expected.
The U.S. Energy Department said last week that U.S. crude inventories have risen to the highest since 1990. That was followed by the U.S. Labour Department on Friday announcing the American economy added 115,000 jobs in April, far fewer than the 165,000 analysts were expecting.
"Economic indicators both in the U.S. and Europe are taking on a more negative appearance," energy trader and consultant Ritterbusch and Associates said in a report.
Investors are also concerned political upheaval in Europe could derail government austerity measures and worsen the region's debt problems.
French Socialist Francois Hollande, who promised during the presidential election campaign to boost spending, defeated President Nicolas Sarkozy. In Greece, the pro-austerity coalition parties suffered a sharp decline in support, which might undermine efforts to keep Greece in the euro currency bloc.
"Lackluster macroeconomic conditions, easing global tensions and bearish fundamentals have started to weigh on oil prices," Morgan Stanley said in a report.
Oil traders often look to global equities as a measure of overall investor sentiment, and stock markets in Asia and Europe were down Monday.
Analysts said investors were also awaiting this week a series of periodic reports on oil markets from the International Energy Agency, OPEC and others, which are expected to show rising stockpiles of crude.
"Market players are focusing increasingly on the physical supply surplus, which the oil market reports ... are expected to confirm," said a report from Commerzbank in Frankfurt. "U.S. inventory figures ... are additionally likely to show that the inventory build has continued."
In other energy trading, heating oil was down 0.46 of a cent at US$3.0042 a U.S. gallon (3.79 litres) and gasoline futures added 1.02 cents to US$2.9860 a gallon. Natural gas was up 6.1 cents at US$2.34 per 1,000 cubic feet.
