NEW YORK: Brent crude prices hit a five-month low near $105 a barrel on Thursday as a jump in US jobless claims triggered a second day of widespread selling in oil markets, but the benchmark crude pared losses late in New York as the euro strengthened.
Over the last two sessions Brent, US crude and US gasoline have all lost more than 4 percent, with traders citing ample supplies and concerns about demand.
Brent crude settled down 77 cents at $106.34 a barrel. That was more than a dollar above the session low of $105.29, which was the lowest level since early November.
US crude oil futures settled at $93.26, down $1.19 but also more than a dollar above the day's low. US gasoline futures settled down almost 2 cents at $2.90 a gallon.
Total Brent crude trading volume was 37 percent above the 30-day moving average, but was down slightly from the previous session when more than a million contracts changed hands.
Trading volume surged early in New York after data showed US initial jobless claims hit a four-month high last week, indicating the labor market recovery in the world's largest oil consumer slowed in March.
The previous session, oil slumped when the US government's Energy Information Administration (EIA) report showed crude oil inventories at a 22-year high.
"Data has been disappointing all week long, and the oversupply of crude just confirmed that," said Bill Baruch, senior market strategist at iitrader.com LLC in Chicago.
"Now the market is getting back to where we should be."
JAPANESE STIMULUS
The dollar rose more than 3 percent and the euro more than 4 percent versus the yen after the Bank of Japan unleashed the world's most intense burst of monetary stimulus, promising to inject about $1.4 trillion into the economy in less than two years.
As gains in the euro outstripped the dollar late in the New York session, oil prices climbed off their lows. A weaker dollar can boost dollar-denominated commodity prices as they become cheaper for holders of other currencies.
"The jobless claims added to the pressure after the Bank of Japan's decision to pump money created a big rally in the dollar and US debt in a safe-haven play," said Phil Flynn, analyst at Price Futures Group in Chicago.
U.S gasoline futures edged back up after breaking through their 100- and 200-day moving averages, technical measures that traders watch closely. Stephen Schork, editor of the commodities newsletter The Schork Report, warned heavy selling in RBOB gasoline this week was "the smoking gun showing we're in a market that got itself extremely overbought."
"Wall Street tipped its hand and made a very bad trade in trying to get long in RBOB gasoline, but now we're looking at normalized inventories and weak demand," Schork said.
Wednesday's EIA report showed four-week average gasoline demand was down 1.2 percent from year-ago levels.
Hedge funds and other large speculators had amassed bets on rising gasoline prices equivalent to more than 80 million barrels of the motor fuel as of March 26, data from the US Commodity Futures Trading Commission showed last week.
That was up from around 59 million barrels four months ago.
On Friday the US government releases its closely watched nonfarm payrolls report for March.
<Center><b><i>Copyright Reuters, 2010</b></i><br></center>
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