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Oil falls after job growth stalls | ASHARQ AL-AWSAT English Archive 2005 -2017
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NEW YORK, (Reuters) – Oil prices fell on Friday after U.S. job growth stalled in August, raising the specter of economic recession in the world’s top oil consumer.

U.S. nonfarm payrolls were unchanged last month, the Labor Department said on Friday. The weakest job reading in a year bucked economists’ expectations for a gain of 75,000 jobs.

Stunted job growth may weigh on fuel demand, although it could also raise the odds of more asset buying, or quantitative easing (QE), by the U.S. Federal Reserve, analysts said.

“The (jobs) data reinforces our concern that the U.S. economy has stalled, and we think there is a 60 percent chance it will fall into recession by the end of the year or at the start of next year,” said Rachel Ziemba at Roubini Global Economics in London.

“We think QE3 is coming,” she said.

By 11:30 a.m. (1530 GMT), Brent was trading 82 cents lower at $113.47 a barrel and U.S. crude was down $1.63 lower at $87.30, after dipping as low as $85.42 earlier.

Oil fell along with equities markets, as the S&P 500 index shed 1.7 percent, as other economic bellwether commodities like copper, which fell 0.9 percent in London. Gold, a perceived safe haven investment, jumped as much as 3 percent to a 1-1/2 week high.

The August U.S. jobs data will be “likely enough to spur Fed easing action at the September meeting,” Goldman Sachs economists wrote in a note on Friday.

New stimulus aimed at staving off a U.S. recession may include the Fed extending the maturity of its Treasuries holdings following a policy meeting slated for September 20-21, economists said.

Friday’s oil price rout wiped out part of U.S. crude’s 4.1 percent gain in the week through Thursday, when it had settled at a one-month high, in part due to a tropical storm threat in the U.S. Gulf of Mexico.

Europe’s Brent crude remained at a near-record premium of more than $26 a barrel to U.S. benchmark West Texas Intermediate on Friday.

STORM RISK, QE3 EXPECTATIONS

Oil companies were still bracing for a tropical depression that may become a storm later on Friday. The weather has forced wide evacuations of offshore oil platforms in the Gulf of Mexico, home to about a third of U.S. oil production and 12 percent of natural gas output.

BP Plc, the largest oil producer in the Gulf, evacuated all personnel from its platforms in the region and shut production. Refiners on the Gulf Coast said they were getting ready for up to 15 inches of rain in the next 48 hours, a forecast that led Louisiana’s Governor to declare a state of emergency.

New Fed stimulus, or QE3, could further weaken the U.S. dollar, which dropped on Friday against perceived safe-haven currencies such as the Swiss Franc and Japan’s Yen. That could spur buying in dollar-denominated commodities including oil, which get cheaper for non-dollar buyers.

On Friday, however, investors were more focused on worsening implications for fuel demand as U.S. unemployment, stuck at 9.1 percent, keeps motorists off the road.

“It is a seriously bad number,” said Thorbjoern Bak Jensen at consultancy Global Risk Management.

“Currently, it seems the lower growth prospects are the winning side of the matter.”

LIBYA OUTPUT

The European Union on Friday lifted sanctions on Libyan ports, oil firms and banks as foreign ministers met to discuss how to help the country’s transition from four decades of rule by Muammar Gaddafi, whose regime has toppled after a civil war.

It remains unclear how quickly the OPEC member’s oil production can return to international markets. Output, which was around 1.6 million barrels previously, has ground to a near standstill since the conflict began in February.

The newly-appointed chairman of Libya’s National Oil Corporation said this week the country’s oil production could restart within weeks and reach full pre-war output within 15 months. Gaddafi, who is believed to remain in Libya and has vowed to stir more fighting among Libya’s tribes and against a new rebel regime, has threatened to prevent oil exports.