Brent slips below $110 on weak US jobs data

Brent crude slipped below $110 a barrel today after disappointing US jobs data and a build in crude stockpiles raised concerns about oil demand in the world’s largest oil consumer.

The onset of seasonal US refinery maintenance, coupled with pipeline outages, has swollen domestic stockpiles and stretched the Brent-WTI oil spread to its widest since April.

But oil price losses were capped by a weak dollar as the disappointing payroll data raised hopes the US Federal Reserve would stick to its economic stimulus this year.

Brent crude oil futures slipped 27 cents to $109.70 a barrel by 0511 GMT, after earlier hitting a session-high of $110.06.

US crude oil futures for December delivery fell 50 cents to $97.80. The November futures, the previous front-month contract, expired yesterday after hitting a low of $97.50, its weakest since July 1st.

The Brent/WTI spread broadened to $12, its biggest gap since mid-April.

“WTI prices are largely dictated by the amount of supply in the US at the moment, which is why WTI really underperformed Brent overnight,” said Ben Le Brun, a market analyst at OptionsXpress in Sydney.

Traders are going to be looking now for further economic and oil data to indicate what the Fed might do about its stimulus programme, he said.

“Markets have priced in a tapering story maybe pushed out into 2014 ... So now, we’re probably looking for economic data coming out in the next 24 hours to dictate prices.”

Data from the American Petroleum Institute showing crude stocks building at Cushing, Oklahoma, after 14 weeks of decline helped to trigger selling of US crude.

Investors are waiting for the latest weekly report from the US Energy Information Administration (EIA), which will return to its normal schedule this week after the US government resumed operations after its shutdown.

US crude prices were also under pressure with a rise in output from major shale oil plays, according to an EIA report.

Brent found support early in the session from the belated release of US jobs data showing nonfarm payrolls increased by 148,000 workers in September, less than expected. While the employment gain in August was revised up, the July figure was revised down to be the weakest since June 2012.

The report suggested the economy was losing momentum even before the US fiscal standoff that partially shut down the government for more than two weeks.

“There is also likely to be added volatility over the next few months, given hiring by some firms was likely to be delayed due to the fiscal uncertainty,” ANZ analysts wrote in a note today. “In such an environment the Fed is likely to keep the foot firmly on the gas pedal with tapering a 2014 story.”

The US dollar wallowed near a two-year low against the euro today, making oil and other commodities priced in the greenback cheaper for holders of other currencies.

Tenuous relations between the United States and Saudi Arabia, the most important oil producer in the Middle East, also supported a geopolitical risk premium in Brent.

Saudi Arabia’s intelligence chief is vowing that the kingdom will make a “major shift” in relations with the United States to protest perceived American inaction over Syria’s civil war as well as recent US overtures to Iran, a source close to Saudi policy said yesterday.

Holding any Brent gains in check, Libya’s oil production is stable at around 600,000 barrels per day (bpd), where it has been for about a month, as the government works to end protests at fields and ports that have cut shipments for months, the National Oil Corp. (NOC) said. (Reuters)