Oil Lower After Weak US Jobs Data

NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved lower Friday morning amid ongoing profit-taking after a disappointing payroll report raised the prospect of a softening U.S. economy that could hurt oil demand, but the losses were curbed by supply disruption in Canada.

At 9:00 AM ET, NYMEX June West Texas Intermediate crude futures fell 46cts to $43.86 bbl while July Brent on the IntercontinentalExchange eased 44cts to $44.57 bbl.

NYMEX June ULSD futures were down 1.64cts to $1.3123 gallon while NYMEX June RBOB futures dropped 1.27cts to $1.4787 gallon.

On Wall Street, equities tumbled along with bond yields and the dollar after Labor Department said 160,000 nonfarm jobs were created in April, the fewest in seven months, falling short of consensus expectation for 200,000 and well below 215,000 for March.

The department also said the national unemployment rate was steady at 5.0% last month, missing an expected decline to 4.9%. But there was wage inflation, with average hourly earnings up 0.3% month-over-month and up 2.5% year-over-year and most of the additional jobs were high-paying professional in nature.

This is the latest disappointing report after data out Thursday showed initial jobless claims rose last week and Wednesday's ADP jobs report showed only 156,000 private sector jobs created in April.

The job report's negative headline today could have a bearish impact on market psychology and probably raise concerns about weaker oil demand, and could also intensify the ongoing debate about whether or when the Federal Reserve should increase interest rates or consider another stimulus measure.

Oil futures prices have moved in volatile swings this week, rallying midweek after a massive wildfire disrupted production in Canadian oil sands. The fire continues to burn around the city of Fort McMurray and an evacuation of the city's 88,000 people is ongoing.

About 50% of Canadian oil comes from the oil sands region and reports said nearly 1.0 million of the 2.5 million bpd total oil sands production has been shut-in by the fire.

Adding to the Canadian supply disruption is the ongoing decline in U.S. oil production. The Energy Information Administration said domestic crude production fell 113,000 bpd to 8.825 million bpd during the week-ended April 29.

Later at 1:00 PM ET, oil services firm Baker Hughes, Inc. will release its weekly rig count report which would indicate whether domestic crude oil production will continue to decline.

George Orwel can be reached at george.orwel@dtn.com