Thursday, October 1, 2009

Oil Declines on Concerns U.S. Economy Struggling to Recover

Oct. 1 (Bloomberg) -- Crude oil in New York fell after an unexpected drop in U.S. business activity and as companies cut more jobs than estimated, adding to concerns over the pace of revival in fuel demand in the biggest energy-consuming nation.

Crude oil pared some of yesterday’s 5.9 percent gain after the Institute for Supply Management-Chicago Inc.’s business barometer trailed economists’ estimates. Companies in the U.S. cut payrolls by a greater-than-forecast 254,000 jobs, a report from ADP Employer Services showed, indicating the labor market will be slow to recover.

“The poor economic news suggests oil should not go too much higher in price, because the U.S. economy is not improving as quickly as hoped,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in an e-mail. “The economy is still in dire shape.”

Crude oil for November delivery declined 46 cents, or 0.7 percent, to $70.15 a barrel in electronic trading on the New York Mercantile Exchange at 10:25 a.m. Sydney time. Yesterday, the contract rose $3.90 to settle at $70.61, the biggest one-day gain since April 2.

Crude oil increased 1 percent in the three months ending yesterday, a third consecutive quarterly gain. The price averaged $68.24 a barrel in the quarter, the highest in a year.

Inventories of crude oil climbed 2.8 million barrels to 338.4 million last week, the Energy Department said yesterday. Supplies were forecast to increase by 2 million barrels. Refinery utilization dropped 1 percentage point to 84.6 percent, the lowest in more than a month. The rate was forecast to fall 0.5 percentage point.

Stocks Decline

U.S. stocks fell after the business activity report. The Standard & Poor’s 500 Index lost 0.3 percent to 1,057.08 in New York. The Dow Jones Industrial Average slipped 29.92 points, 0.3 percent, to 9,712.28. The dollar traded at $1.4654 versus the euro at 8:55 a.m. in Tokyo from $1.4640 in New York yesterday.

The Nikkei 225 Stock Average declined 0.7 percent to 10,061.41 as of 9:03 a.m. in Tokyo. The broader Topix index fell 0.6 percent to 904.30. Australia’s benchmark S&P/ASX 200 Index gained 4.1 points at 10:29 a.m. Sydney time.

Oil gained yesterday after the Energy Department report showed an unexpected decline in supplies of gasoline. Stockpiles of the motor fuel fell 1.66 million barrels in the week ended Sept. 25, the report said. Inventories were forecast to gain 1 million barrels, according to the median of estimates in a Bloomberg News survey.

Brent crude oil for November settlement dropped 17 cents to $68.90 a barrel on the London-based ICE Futures Europe exchange at 10.15 a.m. Sydney time. Yesterday, the contract rose $3.58, or 5.5 percent, to settle at $69.07.

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