Crude Oil Falls on Concern Global Demand Recovery Will Be Slow

By Yee Kai Pin and Ben Sharples

Oct. 5 (Bloomberg) -- Crude oil fell for a second day in New York on concern demand in the U.S., the biggest energy user, will be slow to rebound as the nation’s jobless rate increased.

Oil extended losses from Oct. 2, when prices tumbled as much as 3.5 percent after a Labor Department report showed the U.S. lost more jobs than estimated in September. Economist Nouriel Roubini, the New York University professor who predicted the financial crisis, said Oct. 3 equity and commodity markets may decline in coming months as the gradual pace of the economic recovery disappoints investors.

“Everyone wants to believe the economy will rebound slowly, will not lose ground, but I have no confidence,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo. “Any support will be psychological.”

Crude oil for November delivery fell as much as 67 cents, or 1 percent, to $69.28 a barrel, in electronic trading on the New York Mercantile Exchange. The contract was at $69.76 a barrel at 4:05 p.m. Singapore time. Futures have gained 56 percent this year.

Oil lost 1.2 percent on Oct. 2, the biggest decline since Sept. 24, to settle at $69.95 a barrel. U.S. unemployment climbed to 9.8 percent, the highest since 1983, from 9.7 percent in August, according to the Labor Department.

“We continue to expect this volatility in the data to persist until the oil market emerges from the shoulder-month period and the economic recovery gains more solid footing,” analysts at Goldman Sachs Group Inc., led by Allison Nathan, said in a report today.

‘Easy Money’

Governments around the world have injected $2 trillion in stimulus while central banks have cut interest rates to close to zero in efforts to revive growth. This “easy money” has created asset bubbles, causing markets to rise too quickly, Roubini said in an interview in Istanbul.

Asian shares extended last week’s losses, with the MSCI Asia Pacific Index pulling back 0.8 percent to 113.60 as of 3:56 p.m. in Tokyo. On Oct. 3, the Standard & Poor’s 500 Index retreated 1.8 percent to close at 1,025.21, posting its first two-week drop since July. The Dow Jones Industrial Average was down 1.8 percent at 9,487.67. European equities fluctuated between gains and losses.

“The equity markets are starting to realize that things may have run too hard, too quickly,” said Mark Pervan, senior commodity strategist at ANZ Banking Group Ltd. in Melbourne. “It’s all pointing downward.”

Brent crude oil for November settlement fell to as low as $67.28 a barrel on the London-based ICE Futures Europe exchange, down 79 cents, or 1.2 percent. It was at $67.79 a barrel at 4:05 p.m. Singapore time. The contract lost 1.6 percent on Oct. 2, the biggest decline since Sept. 24.

“Traders are trying to get a handle on which factors are moving this market right now, and prices have been moving erratically in response to a number of conflicting signals,” Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut, said in a note.

Surpassing Saudis

Russia surpassed Saudi Arabia as the world’s largest oil producer last month. Russia increased its output 1.7 percent to a post-Soviet high in September from a year earlier, after OAO Rosneft starting pumping from a new field in August. Production rose to 10.01 million barrels a day from 9.84 million barrels, the Energy Ministry’s CDU-TEK unit said Oct. 2.

“Russia again saw record production levels, so that’ll hang on the market,” Pervan said.

Saudi Arabia was the world’s largest oil producer in 2008, according to U.S. Energy Department data and estimates from Bloomberg News.

The kingdom pumped 8.015 million barrels a day last month, based on a Bloomberg survey. It has cut output by 17 percent from 9.6 million barrels a day in July 2008 as part of an effort by the Organization of Petroleum Exporting Countries to support prices by curtailing shipments.

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net