Crude oil futures fell on Thursday as signs of a further economic slowdown in Europe and a weaker factory sector in China outweighed better-than-expected US manufacturing data. First-time filings for jobless benefit s in the United States, the No 1 oil consumer, rose to their highest since late October, also adding pressure on crude futures.
Concerns over an immediate loss of Iranian crude eased. While European Union foreign ministers agreed on the need for new sanctions against Tehran, they fell short of immediate action that could have included a ban on imports of its oil. As of 2:45 pm EST (1935 GMT), ICE January Brent crude traded in London at $109.02 a barrel, down $1.50, slipping from a session high of $111.24.
US January crude settled at $100.20, dipping 16 cents. It hit an early high of $101.17. US crude pared losses near the close, ahead of Friday's non-farm payrolls and employment report for November. A Reuters poll forecast that US jobs rose by 122,000 last month with the unemployment rate holding at 9.0 percent. Thursday's ADP National Employment Report showed private-sector jobs rose 206,000 last month, raising hopes that Friday's data, which includes private- and public-sector employment, would reflect signs of a strengthening economy.
Brent's premium against US crude narrowed to around $8.90, after closing at $10.16 on Wednesday. Trading volumes were light with Brent dealings down 15 percent from their 30-day average. US crude trading was down almost 27 percent from its 30-day average. Global manufacturing activity edged lower last month, contracting across Europe and most of Asia, shrinking even further in the eurozone and reinforcing the view that the debt-strapped region is in recession, according to an index produced by J.P. Morgan.
The factory sector in China, the No 2 oil consumer, shrank in November due to weaker demand at home and abroad, two surveys showed, underlining the move by its central bank on Wednesday to cut bank reserve requirements in a bid to boost the economy. "We continue to view the crude oil market as navigating between the currently tight physical oil markets and the threat that the European debt crisis could trigger a global economic recession in the near future, which would lead to a sharp drop in oil demand," Goldman Sachs analysts led by David Greely said in a research note.
Goldman's warning came a day after a surprise joint announcement from top central banks that they were taking measures to ease a credit squeeze arising from the eurozone debt crisis. In early trade, a brief shoring up of oil prices occurred after an industry report from the Institute for Supply Management showed growth in the US manufacturing sector picked up in November to its strongest since June.