Oil Snaps Three Days of Gains on Signs Demand Is Yet to Recover

Nov. 5 (Bloomberg) -- Crude oil fell, snapping three days of gains, on concern an increase in stockpiles in a key storage area in the U.S. shows fuel demand has yet to recover.

Oil slipped below $80 a barrel as inventories at Cushing, Oklahoma, where New York-traded West Texas Intermediate grade is stored, rose for the third time in four weeks. Oil also dropped before a report from the Labor Department, which is forecast to show that unemployment in the world’s biggest energy user rose in October.

“Based on fundamentals, we should be in the $50s for oil, not $80s,” said Clarence Chu, a trader at options dealer Hudson Capital Energy in Singapore. “Until U.S. starts creating jobs, I wouldn’t say the economy is on the road to recovery, because jobs change how people spend money on goods.”

Crude oil for December delivery fell as much as 78 cents, or 1 percent, to $79.62 a barrel on the New York Mercantile Exchange. It was at $79.88 a barrel at 4:07 p.m. Singapore time. Yesterday, the contract rose 80 cents, or 1 percent, to settle at $80.40 a barrel, the highest since Oct. 23. Futures have gained 79 percent this year.

Oil climbed to a one-week high yesterday after a report from the Department of Energy showed total crude supplies unexpectedly declined. Inventories fell 3.94 million barrels last week, the report said. A 1.5 million-barrel increase was forecast, according to a Bloomberg News survey of analysts.

Stockpiles of crude in Petroleum Administration for Defense District 2, where Cushing is, rose 622,000 barrels to 78.1 million barrels for the week ended Oct. 30, the highest in six weeks. Supplies at Cushing gained 30,000 barrels to 25.5 million barrels.

Unemployment Data

The Labor Department on Nov. 6 will report that the unemployment rate rose to 9.9 percent in October, from 9.8 percent the previous month, as companies cut another 175,000 jobs, according to the median forecasts in a Bloomberg News survey of economists.

“Oil prices have been reflecting the ongoing uncertainty in the global economy,” said Justin Smirk, a senior economist at Westpac Banking Corp. said in Sydney. “Demand side has been very soft as well as holding prices down but as the global recovery gains momentum, that’s going to kick in more steam.”

The MSCI Asia Pacific Index dropped 0.7 percent to 114.56 as of 3:09 p.m. in Tokyo. The gauge has slumped 5.5 percent from a 13-month high on Oct. 20 amid concerns the withdrawal of stimulus measures will cause the global recovery to falter. European stock-index futures also declined.

Brent crude oil for December settlement declined as much as 78 cents, or 1 percent, to $78.11 a barrel on the London-based ICE Futures Europe exchange. The contract traded at $78.33 at 4:08 p.m. Singapore time.