Oil steadies near $70, eyes on US economy
Perth, October 5, 2009
Oil was little changed at just below $70 on Monday, pausing from the previous session's losses, as concerns about a halting US economic recovery and sluggish energy demand continued to cast a pall on crude prices.
Oil prices fell more than 1 percent on Friday as doubts over an economic recovery resurfaced after data showed the US unemployment rate had soared to a 26-year high.
US crude for November delivery dipped 3 cents to $69.92 a barrel by 0226 GMT. The contract settled down 87 cents at $69.95 a barrel on Friday.
London Brent crude inched down 2 cents to $68.09.
'The market is cautious after the poor US jobs data on Friday. But the overall trend of an economic recovery hasn't changed and I think investors are using such weaker-than-expected data as an opportunity to take profits,' said Ben Westmore, a commodities analyst at the National Bank of Australia.
US employers cut a deeper-than-expected 263,000 jobs in September, lifting the unemployment rate to 9.8 percent, the highest since June 1983. The Labor Department said payrolls had now dropped for 21 consecutive months.
Analysts said a further decline in the US dollar could lift oil prices, while all eyes will be the US manufacturing data for September due later on Monday.
The US service sector is thought to have been on the verge of growth in September after 11 months of contraction, according to a Reuters' poll of economists.
The US dollar index fell 0.28 per cent against a basket of currencies to 76.79 points on Monday, amid expectations that US interest rates will stay near zero for some time.
With a thin economic calendar in the US, the oil price is likely to take its cue from equities markets, leading some analysts to caution that it could hit more speed bumps this week if the start of the third-quarter earnings season provides little evidence the economic recovery is gaining strength.
Oil gained nearly 6 percent last week, largely bolstered by a US government report mid-week showing a surprise drop in gasoline inventories as well as tensions between key oil exporter Iran and the West over Tehran's nuclear programme.
However, analysts said, crude prices are likely to lose some support from geopolitical tensions, after Iran and the US described recent talks as productive, with Iran allowing inspectors from United Nations into a uranium enrichment plant.
Still, crude prices are still trading in the $65-$75 range of seen over the past two months and some analysts said prices are unlikely to break out of the $75 mark until energy demand worldwide start to show more convincing signs of a rebound.
The amount of crude oil held at sea on tankers is likely to fall as consumption grows in the fourth quarter, the chief executive of the world's biggest independent oil tanker group Frontline said on Friday.
Money managers cut net long crude oil positions on the New York Mercantile Exchange in the week to Sept. 29, the Commodity Futures Trading Commission said in a report on Friday. – Reuters