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A disappointing reading on March U.S. payrolls sent crude oil futures tumbling, with Brent crude sinking to an eight-month low, on fresh concerns about weak oil demand in the world's biggest crude consumer.
Brent crude for May delivery fell $2.09, or 2%, to $104.25 a barrel, poised to settle at its lowest level since July 24.
Light, sweet crude for May delivery settled 56 cents, or 0.6%, lower at $92.70 a barrel on the New York Mercantile Exchange, its lowest level in two weeks.
The U.S. added just 88,000 jobs in March, according to the Labor Department Economists surveyed by Dow Jones Newswires had expected nonfarm payrolls to rise 200,000.
The unemployment rate, obtained from a separate survey, ticked 0.1 point lower to 7.6%.
The report was a particularly heavy blow for oil markets, analysts said, because the U.S. economy had been adding jobs at a quickening clip in recent months. Job growth is closely correlated with oil demand because fewer jobs means fewer motorists driving to work, buying goods or taking vacations.
"The employment rate is very critical to having a constructive outlook on energy demand," said John Kilduff, founding partner at Again Capital in New York. "It's been a bright spot, and now it's obviously diminishing."
Friday marked the third straight day of lower crude prices, with Nymex crude shedding 4.7% this week and the Brent contract posting a 5.2% loss. Analysts attribute the declines to a drumbeat of disappointing economic news this week, including a weak jobs report Wednesday from Automatic Data Processing Inc. and a disappointing read on weekly jobless claims Thursday.
Brent's heavier losses have raised expectations among investors that the two crude-oil benchmarks, which have traded far apart for more than two years, may be closing in on each other again. Brent's premium to WTI shrank on Friday to under $12 to its narrowest since late June.
"This week is really not about oil fundamentals; it's about global macro [news] and appetite for risk in commodities as a whole," said Brison Bickerton, managing director at Freepoint Commodities, a trading firm.
Brent's losses have been exacerbated by several independent factors, say analysts, including improving output in the North Sea--where the crude is produced--and cooling global tensions. Dow Jones Newswires data indicate that loadings of crude oil in the North Sea in May are set to rise 8.5% from April levels.
Meanwhile, Iran sat down Friday with global powers to discuss plans to end an international stand-off over its nuclear program, signaling that a violent confrontation remains unlikely even if diplomatic progress remained elusive.
A series of high-profile oil analysts have taken an increasingly bearish stance on oil prices in recent weeks. Last week, analysts at Citigroup said rising efficiency and increasing natural-gas demand could cause oil demand to peak by the end of this decade, leading oil prices to trade between $80 and $90 a barrel in the long term.
On Wednesday, oil analysts at Barclays cut their forecast for 2013 Brent crude to $112 a barrel from $125 a barrel, and their view for Nymex crude to $95 a barrel from $108 a barrel. The analysts cited a "a more placid geopolitical environment than previously expected."
Refined fuels also plumbed new lows Friday. Front-month May reformulated gasoline blendstock, or RBOB, settled lower by 3.51 cents, or 1.2%, at $2.8636 a gallon, its lowest finish since Feb. 27.
May heating oil finished lower by 5.36 cents, or 1.8%, at $2.9098 a gallon, a one-week low.
Copyright (c) 2013 Dow Jones & Company, Inc.
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