Jobs Report Punishes Oil

BPNew York, May 4th ( – Oil woes on Friday can be summed up quite easily: A weak April jobs report proved to be public enemy number one for crude to end the week. NYMEX-traded crude for June delivery plunged $4.83 to $97.70 per barrel. In London, Brent crude for June delivery fell $1.98 to $114.10 per barrel. The 4.7% loss for West Texas Intermediate, the contract traded on the NYMEX, was the worst one-day loss since a 5.2% tumble in December. It is the first time since February that WTI has traded below $100 per barrel.


The weak jobs report sent traders scurrying into the safe haven of the U.S. dollar as the PowerShares DB US Dollar Index Bullish (NYSE: UUP) added 0.4%. The Labor Department said employers added 115,000 new jobs in April, well below the 160,00 economists expected. The March number was revised up to 154,000 from 120,000.


While it was nice to see the March number revised higher, and it should be noted that the April number has a tendency to be revised higher as well, traders obviously focused more on the disappointing initial April reading. Crude had been meandering lower over the past several days in anticipation of the April non-farm payroll number on concern the number would not live up to expectations.


Oil bulls must now come to grips with the fact that the U.S. economic recovery is not as robust as previously hoped and that oil demand is waning while supplies are increasing. Those factors stand in stark contrast to what was seen earlier this year as oil demand was seen as rising as the U.S. delivered a spate of encouraging economic data points.


A loss of nearly 170 points for the Dow Jones Industrial Average led to some pain for Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX), which lost 1.3% and 2.1% respectively. ConocoPhillips (NYSE: COP) slid 2.1% as well and the chart indicates some potential technical issues on the horizon for that stock.


Shares of BP (NYSE: BP), Europe’s second-largest oil company, tumbled 2.6% following news that the civil trial pertaining to the company’s involvement in the 2010 Gulf of Mexico oil spill will be delayed until 2013. Investors have been eager for BP to put the spill-related legal woes behind and the longer it takes for that happen, some might say the more reasons there are to be cautious about this particular name.


Chesapeake Energy (NYSE: CHK), the second-largest U.S. natural gas producer, was a surprise winner on the day. On heavy volume, the stock gained almost 1.2% despite the company announcing an informal SEC inquiry and Fitch ratings saying it has lowered its outlook on the company to negative from stable. 



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