Forexpros – Crude and Brent oil futures were down sharply during European morning trade on Monday, extending heavy losses from the previous session, when dismal U.S. employment data amplified concerns over weakening global growth prospects.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD81.97 a barrel during European morning trade, dropping 1.5%.
It earlier fell by as much as 1.75% to trade at USD81.50 a barrel, the lowest since October 6, 2011.
Energy prices came under pressure after the Department of Labor said Friday that the U.S. economy added just 69,000 jobs in May, the smallest increase in a year and far below expectations for a gain of 150,000.
The unemployment rate unexpectedly ticked up to 8.2% from 8.1%, the first increase in 11 months.
The number of new jobs created in April was slashed to 77,000 from an original estimate of 115,000, while job growth in March was revised down to 143,000 from a previously reported 154,000.
Oil traders have long been taking cues from the monthly jobs report, the most-closely followed indicator of U.S. employment, because it offers insight into the economic health of the world’s biggest crude oil consumer.
Meanwhile, downbeat manufacturing data from China and Europe hurt prospects for global oil demand, further weighing on energy prices.
HSBC’s China Purchasing Managers’ Index slipped to 48.4 in May versus April’s 49.3, a sign that the world’s second largest economy may be cooling.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the implementation of harsh austerity measures in Europe.
Manufacturing activity in the euro zone also shrank at the fastest pace in three years to 45.1 in May from 45.9 in April, according to the Markit purchasing managers’ index.
Ongoing concerns surrounding Spain’s deteriorating financial situation as well as fears over a potential Greek exit from the euro zone also weighed.
There are worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil. The euro zone accounted for nearly 12% of global oil consumption in 2010, according to data from British Petroleum.
Oil futures have been on a rapid decline since the uncertain outcome of the May 6 elections in Greece, which threw the future of the country’s international bailout deal into doubt and fuelled fears over a possible Greek exit from the euro zone.
NYMEX oil prices have fallen more than 22% in the past five weeks, the largest five-week loss since the week to January 18, 2009. Prices are down almost 26% since hitting a March 1 intraday peak of USD110.53 a barrel.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery tumbled 1.4% to trade at 97.03 a barrel, with the spread between the Brent and crude contracts standing at USD15.06.
Earlier in the day, prices fell to USD96.63 a barrel, the lowest since January 26, 2011.
For the month, London-traded Brent crude lost 17.5%, the most since May 2008. Prices are down nearly 25% since hitting an intraday high of USD128.38 on March 1.
A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.
But revived talks between Iran and major powers over Tehran’s nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.
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