Oil falls as investors focus on weak economy

NEW YORK — Oil dropped nearly 2 percent Friday as investors shrugged off U.S. job gains and focused on lingering concerns about the global economy.

Benchmark West Texas Intermediate crude for September delivery fell $1.70 to $84.93 per barrel on the New York Mercantile Exchange.

Prices pulled back from an early surge. A government report on Friday morning showed employers added 117,000 jobs in July. Unemployment fell slightly, to 9.1 percent. The news helped push crude as high as $88.32 before it tapped off.

Investors are still rattled by the stock market's plunge on Thursday, when the Dow Jones industrial average fell 513 points, or more than 4 percent, to its worse decline since the 2008 financial crisis. Oil dropped by an even greater amount, losing nearly 6 percent, to a six month low on Thursday.

Investors focused on Europe's debt struggles and the fear of another recession. Italy and Spain face enormous debts while Germany said its industrial production declined 1.1 percent in June. The U.S. also plans to cut spending by $2.4 trillion over the next decade.

“There's just a lot of pessimism out there now,” Andrew Lebow, a senior vice president and oil broker at MF Global.

But oil's drop could bring relief to motorists within days. Lower oil should push down gasoline prices, which are down from a peak in May.

Retail gasoline prices slipped overnight to $3.70 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of gasoline is 28.5 cents cheaper than its peak, although it's still 93.5 cents higher than the same time last year.

Brent crude, which is used to price many international varieties, did climb on the ICE Futures Exchange in London. But its rise was prompted by an oil pipeline explosion in Iran, the world's third largest oil exporter. The cause of the blast is still under investigation.

Investors have worried about international oil supplies since February, when an uprising in Libya forced the country to shut down oil fields that exported 1.5 million barrels per day of high-quality crude.

In other Nymex trading for September contracts, heating oil added 1.79 cents to $2.9118 per gallon and gasoline futures rose 1.96 cents to $2.7568 per gallon. Natural gas rose 1.5 cents to $3.956 per 1,000 cubic feet.