Oil Heads for Biggest Weekly Decline Since May

Oil Heads for Biggest Weekly Decline Since May, Wiping Out Gains for Year

By Margot Habiby and Ben Sharples -

Oil fell in New York, heading for the biggest weekly decline in three months, as investors bet that signs of a slowing economy in the U.S. indicate fuel demand will falter in the world’s biggest crude-consuming nation.

Futures slid as much as 0.6 percent after slumping 5.8 percent yesterday. Oil erased this year’s gains as reports showed a rise in jobless claims last week and a drop in consumer confidence to the lowest in more than two months. A Labor Department report today may show that the U.S. failed to create enough jobs in July to reduce unemployment, according to a Bloomberg News survey.

“What you’re looking at here is concerns about what demand is going to be doing because of the economy,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “The result of all this could be slower growth and the result of slower growth is less oil demand.”

Crude for September delivery dropped as much as 50 cents to $86.13 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.35 at 9:11 a.m. Sydney time. The contract yesterday tumbled $5.30 to $86.63, the lowest settlement since Feb. 18. Prices are down 9.8 percent for the week and 5.5 percent in 2011.

Brent oil for September settlement fell $5.98, or 5.3 percent, to $107.25 on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract settled at a $20.62 premium to U.S. futures, compared with a record $22.67 close on Aug. 2.

U.S. Economy

U.S. stocks plunged, driving the Standard & Poor’s 500 Index to the biggest decline since February 2009. The S&P 500 decreased 4.8 percent to an eight-month low of 1,200.07 at the 4 p.m. close in New York.

Applications for jobless benefits decreased 1,000 in the week ended July 30 to 400,000, the Labor Department said yesterday in Washington. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey.

A Labor Department report today may show that U.S. payrolls rose by 85,000 workers after an 18,000 increase in June that was the smallest this year, according to the median forecast of 88 economists surveyed by Bloomberg News. The jobless rate probably held at 9.2 percent after rising in each of the previous three months.

The Bloomberg Consumer Comfort Index was minus 47.6 in the week to July 31, the lowest since May, compared with minus 46.8 the prior period. Confidence among women fell to the lowest level since October 2009, while Americans making more than $100,000 a year were the most pessimistic since November 2009.

U.S. crude oil stockpiles climbed for a second week in the seven days to July 29, according to an Energy Department report on Aug. 3. Inventories increased 950,000 barrels to 354.9 million, the report shows.