Oil futures fell to almost $100 a barrel Wednesday, after disappointing readings on U.S. manufacturing and employment levels spurred concerns about oil demand.
Light, sweet crude for July delivery settled down $2.41, or 2.4%, to $100.29 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange, which has traded above $100 a barrel since February, recently fell $2.17, or 1.9%, to $114.56 a barrel.
Crude ended lower after the ISM manufacturing index fell short of expectations, indicating growth in the energy-intensive manufacturing sector has not been as fast as economists expected. The index fell to 53.5 in May, compared with a forecast for 57. Readings above 50 indicate growth.
April's reading came in at 60.4.
"The manufacturing sector had been a big engine for growth," said Andy Lebow, senior vice president for energy at MF Global. "It's very significant on the diesel (demand) side."
A separate report said the U.S. private sector hired 38,000 new workers last month, well below the 190,000 expected by economists. The report, by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers, is also prompting worries about oil demand in the world's largest crude consumer.
"Soft data is what caused all this to happen, started the slide," said Mark Waggoner, president of Excel Futures.
The disappointing jobs reading comes ahead of the most closely watched report on U.S. employment levels, the non-farm payrolls report, due Friday.
Several reports have suggested the U.S. economy struggled in May. Regional factory reports were weak, jobless claims remained high, and the Conference Board's consumer confidence index fell sharply last month.
Wednesday's decline wiped out Tuesday's gains. Futures rose more than 2% Tuesday on reports that European countries appeared closer to another bailout of Greece, as well as on the outage of TransCanada Corp.'s Keystone pipeline network.
The pipeline network connects heavy oil fields in Alberta with the Nymex delivery point of Cushing, Okla. Less oil flowing into Cushing is seen as easing the supply glut at the oil hub and supporting the Nymex contract.
The pipeline remained down for repairs Wednesday, spokesman Terry Cunha said.
Later Wednesday, traders will turn to the first of two weekly reports on U.S. crude and fuel inventory levels. The American Petroleum Institute, an industry group, will release its inventory survey at 4:30 p.m. EDT. The more closely followed Department of Energy survey is due Thursday at 11 a.m. Both reports will be released a day later than usual due to the U.S. Memorial Day holiday Monday.
Analysts expect the reports to show oil inventories falling 1.2 million barrels, according to a survey by Dow Jones Newswires. Gasoline stockpiles are seen rising by 300,000 barrels, while stocks of distillates, including heating oil and diesel, are forecast to fall 200,000 barrels, according to analysts.
Front-month July reformulated gasoline blendstock, or RBOB, settled down 7.30 cents, or 2.4%, to $2.9773 a gallon. July heating oil settled down 4.43 cents, or 1.5%, to $3.0087 a gallon.