Weak employment report drags oil down near $72
Oil prices dropped Friday after a key barometer of the economy showed that U.S. companies remain reluctant to hire -- dampening prospects that a rebounding economy mean more oil and gasoline demand.
The nation's payrolls added 431,000 jobs last month, almost all of them from temporary census jobs. The unemployment rate inched down to 9.7 percent. Private companies added just 41,000 jobs, compared with 218,000 in April, and well below analysts' forecasts.
Stock markets dropped with the weaker-than-expected private-sector hiring picture, and that pulled down oil prices as well. The Dow Jones Industrial Average, the NASDAQ and the S&P 500 were all down about 2 percent in late-morning trading.
Meanwhile, retail gasoline prices rose Friday for the first time in nearly a month, though analysts think pump prices for June are likely to continue falling, albeit at a slower pace.
Benchmark crude for July delivery dropped $2.38 at $72.23 per barrel in trading on the New York Mercantile Exchange. Earlier in the session, it climbed as high as $75.42. The contract rose $1.75 to settle at $74.61 on Thursday.
"This jobs report makes it look like we're not going to see a summer boom," said Mike Lynch of Strategic Energy and Economic Research.
"In the last week or so there have been little bits or hints that maybe the economy is not as great as expected," he said.
Even with government data showing demand for fuel picking up, supplies remain abundant and there is adequate refining capacity.
Economic news trumped a Thursday report that the Obama administration will stop all new drilling in the Gulf of Mexico, regardless of water depth, because of the oil spill in the Gulf of Mexico. The government denied that it extended a moratorium on drilling in the Gulf to include shallow-water operations. Last week President Obama put a six-month freeze on new deepwater drilling there.
Prices at the gas pump rose a penny overnight to a national average of $2.726 per gallon. It's the first increase in 28 days, according to AAA, Wright Express and Oil Price Information Service.
Prices have fallen 2.3 cents in the past week and 19.3 cents in the past month. Prices are 15.4 cents above last year's prices.
Friday's retail gas increase was due mostly to higher wholesale prices on the West Coast, said OPIS' Tom Kloza.
He said the trend in June for the rest of the country is toward slightly lower prices. If prices drop below $2.695 per gallon nationally, they would be lower than the peak price around the beginning of summer last year.
In other Nymex trading in July contracts, heating oil fell 6.12 cents to $1.9779 a gallon, and gasoline dropped 6.37 cents to $2.0175 a gallon. Natural gas rose 8.1 cents to $4.771 per 1,000 cubic feet.
In London, Brent crude was down $2.46 at $72.95 a barrel on the ICE Futures exchange.