Oil Set for Third Weekly Loss After U.S. Unemployment Increases

July 3 (Bloomberg) -- Crude oil extended its losses, poised for a third week of declines, after a U.S. report showed unemployment in the world’s largest energy consuming nation rose to the highest in almost 26 years last month.

Oil dropped more than $2 a barrel yesterday after the Labor Department said employers cut 467,000 jobs in June, a signal that U.S. fuel demand will be slow to rebound. Crude also fell as equities dropped and the dollar climbed against the euro.

“The negative jobs report was not taken well by the equities or oil market,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “Helping to push oil lower was a fall in the Dow Jones by over 200 points and a drop in the euro back to $1.40.”

Crude Oil for August delivery dropped as much as 42 cents, or 0.6 percent, to $66.31 a barrel on the New York Mercantile Exchange, and was at $66.45 at 9:14 a.m. in Sydney. Oil fell $2.58 to $66.73 yesterday. Futures are down 3.9 percent this week.

June’s employment decline was more than forecast and followed a 322,000 decrease in May. Payrolls were estimated to fall 365,000 after a 345,000 drop initially reported for May, based on the median of 79 economists surveyed by Bloomberg News.

The jobless rate jumped to 9.5 percent, the highest since 1983, from 9.4 percent. U.S. fuel supplies increased last week by more than analysts forecast.

Stocks Drop

The Standard & Poor’s 500 Index tumbled 2.9 percent to 896.42, extending its slump since June 12 to 5.3 percent and erasing its 2009 gain. The Dow Jones Industrial Average fell the most since April 20.

Declining crude oil and gasoline prices helped send the Reuters/Jefferies CRB Index of 19 raw materials lower. The index dropped 1.8 percent to 246.60.

A rising dollar makes raw materials such as oil and gold less attractive to investors. The dollar traded at $1.3944 per euro at 8:43 a.m. in Tokyo, after advancing 1 percent yesterday.

There will be no floor trading in New York today because of the Independence Day holiday. All electronic trading will be counted as part of the session on July 6.

Gasoline for August delivery declined 1.1 cents, or 0.6 percent, to $1.78 a gallon at 8:22 a.m. Sydney time in New York. Yesterday, it fell 7 cents, or 3.8 percent, to $1.789 a gallon. Futures touched $1.7822, the lowest since May 26.

Oil Supply

Kuwaiti Oil Minister Sheikh Ahmed al-Sabah said oil prices above $100 would weaken the global economy. There is an oversupply of oil in the market and if the situation continues, OPEC will “definitely” not increase output in the group’s next meeting on Sept. 9, he told reporters in Kuwait City yesterday.

“Hopefully in the third and fourth quarter it won’t surpass the $100 mark because this will fuel recession again,” Sheikh Ahmed said.

The Organization of Petroleum Exporting Countries, in a meeting May 28 in Vienna, decided against cutting production targets because of concern higher prices might harm an ailing global economy. The group increased output for a third month in June, a Bloomberg News survey showed. Members pumped an average 28.23 million barrels a day last month, up 55,000 from May.

Brent crude oil for August settlement yesterday declined $2.33, or 3.4 percent, to $66.46 a barrel on London’s ICE Futures Europe exchange.