Oil declined for a second day in New York as investors speculated that signs the Chinese and U.S. economies are weakening indicate fuel demand will falter in the world’s biggest crude-consuming nations. Futures slipped as much as 0.9 percent after a Chinese services index fell to a record low in August. Prices slumped 2.8 percent on Sept. 2 after a report showed U.S. employment stagnated. Crude also declined as Exxon Mobil Corp. and Royal Dutch Shell Plc returned workers to some oil and natural gas platforms after Tropical Depression Lee moved out of the Gulf of Mexico. London-traded Brent narrowed its premium to U.S. prices. “The sentiment is negative as a result of the employment data and people are starting to think the economy is kaput,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney. “Equity prices are under pressure, crude is under pressure. Confidence will have to be rebuilt.” Crude for October delivery fell as much as 77 cents to $85.68 a barrel in electronic trading on the New York Mercantile Exchange, and was at $85.83 at 1:37 p.m. Sydney time. The contract dropped $2.48 to $86.45 on Sept. 2. Prices are up 15 percent the past year. There will be no Nymex floor trading today because of the Labor Day holiday. Brent oil for October settlement decreased 69 cents, or 0.6 percent, to $111.64 on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $25.79 to U.S. futures, compared with a record close of $26.21 on Aug. 19. Employment, Services Oil slid after a purchasing managers’ index in China, the world’s second biggest consumer, dropped to 50.6 from 53.5 in July. The reading, near the borderline of 50 that marks expansion or contraction, was the lowest since the series began in November 2005, according to a statement issued by HSBC Holdings Plc. U.S. payrolls were unchanged last month, the weakest reading since September 2010, the Labor Department said in Washington Sept. 2. Hedge funds boosted bullish bets on oil by the most since March last week as Hurricane Irene took aim at the U.S. East Coast, threatening imports, pipelines and refineries. The funds and other large speculators increased wagers that prices will rise by 13 percent in the week ended Aug. 30 to the highest level since July 26, according to the Commodity Futures Trading Commission’s Sept. 2 Commitments of Traders report. Tropical Depression Lee weakened from a tropical storm to a depression after making landfall and soaking Louisiana and much of the nearby Gulf Coast. About 60 percent of oil production and 44 percent of natural gas output was halted in the Gulf of Mexico, according to the Bureau of Ocean Energy Management, Regulation and Enforcement. The weather system was about 60 miles (95 kilometers) east- southeast of Alexandria, Louisiana, moving east-northeast at 7 miles per hour, the U.S. National Hurricane Center said in an advisory at 10 p.m. Central Daylight Time yesterday. Crews are resuming production in the western Gulf after inspecting equipment for damage, David Eglinton, a spokesman for Exxon Mobil, based in Irving, Texas, said yesterday in an e- mail. Shell confirmed it began returning staff after evacuating as many as 858 workers. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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