The price of North America’s benchmark crude oil plunged to fresh eight-month lows below $82 U.S. a barrel on Monday as a weak U.S. jobs report last week continued to spark a global sell-off in stocks and commodities.
By early afternoon in Europe, benchmark oil for July delivery was down $1.08 to $82.15 per barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, the contract briefly traded at $81.21, the lowest since October.
In London, Brent crude for July delivery was down $1.70 at $96.73 per barrel on the ICE Futures exchange, the lowest since January 2011. The international benchmark crude has tended to be higher than North American crude.
Figures are in U.S. dollars.
Analysts have said they don’t expect larger oil projects will be in jeopardy, despite the rapid decline in the price of crude, but the rapid slide may lead some companies to trim their capital spending plans.
The U.S. Labor Department said Friday that employers in the U.S. added just 69,000 jobs in May, the fewest in a year and well below what economists expected. The unemployment rate rose for the first time since last June, up to 8.2 per cent from 8.1 per cent.
Energy trader and consultant The Schork Group in a report to clients called the employment report “mind-numbingly bad”.
It was the third month in a row that U.S. jobs growth has disappointed, suggesting the economy is slowing and oil demand will likely increase less than expected this year.
Crude has plummeted 23 per cent in the last month amid signs of weak global economic growth. As Europe struggles to contain its debt crisis, signs of sputtering Chinese growth have coupled with a faltering U.S. recovery to undermine investor confidence.
Oil traders often look to global stock markets as a barometer of overall investor sentiment, and Asian and European equities were mostly lower Monday after the Dow Jones industrial average plunged 2.2 per cent Friday.
Sustained lower crude prices should eventually bring down the cost of oil products such as gasoline, freeing up cash for consumer spending. The slump in commodities prices should also ease global inflation pressure and give policy-makers more leeway for fiscal or monetary stimulus measures.
“The recent drop in commodity prices acts as a monetary lever loosening conditions,” said Sean Darby, a strategist with Jefferies Group. “In particular, this will benefit emerging markets which should be able to cut interest rates further.”
A stronger dollar also contributed to the drop in oil prices by making crude more expensive for traders using other currencies.
On Monday, the euro was down to $1.2420 from $1.2424 late Friday in New York. The dollar rose to 78.10 yen from 78.08 yen.
“Poor economic data from the U.S. and China, plus the sovereign-debt crisis in the eurozone, are causing the U.S. dollar to appreciate and are putting equity and therefore also commodities markets under pressure,” said analysts at Commerzbank in Frankfurt. “In the near future there is no end in sight to the downward spiral.”
In other energy trading, heating oil was down 3.48 cents at $2.5931 per gallon while gasoline futures fell 3.11 cents at $2.6257 per gallon. Natural gas gained 5.5 cents at $2.381 per 1,000 cubic feet.
