Oil fell as Japan’s economy shrank more than estimated in the first quarter and commodities retreated following the biggest rally in nine weeks. Oil tumbled as much as 0.7 percent after Japan’s Cabinet Office reported that gross domestic product in the world’s third-largest oil consuming country contracted in the wake of the March 11 earthquake and tsunami. Commodities from sugar to metals and energy retreated as the dollar pared earlier losses. “The negative economic news out of Japan could be a bit of a negative for commodities, including oil,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The dollar is putting a little pressure on crude, and you might see some profit taking after yesterday’s rally.” Crude for June delivery fell 20 cents to $99.90 a barrel at 9:36 a.m. on the New York Mercantile Exchange. It advanced $3.19 to $100.10 yesterday, the highest settlement since May 10. Prices have risen 43 percent in the past year. Japanese GDP contracted an annualized 3.7 percent in the three months through March, following a revised 3 percent drop in the previous quarter, the Cabinet Office said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for a 1.9 percent drop. The Thomson Reuters/Jefferies CRB Index of 19 commodities declined 0.5 percent to 342.48 after surging 2.3 percent yesterday in the biggest advance since March 17. Twelve of the commodities were down today. The Dollar Index, which measures the currency against six major counterparts, was little changed at 75.435 compared with 75.475 yesterday. Jobs Report Jobless claims in the U.S. declined by 29,000 to 409,000 in the week ended May 14, the lowest level in a month, Labor Department figures showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a drop to 420,000. The U.S. is the world’s largest oil-consuming country, followed by China and Japan. Brent crude for July settlement rose 30 cents, or 0.3 percent, to $112.60 a barrel on the London-based ICE Futures Europe exchange. To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net. To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net.

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