Oil futures tumbled Friday after the government said the U.S. economy barely added jobs last month, fueling worries that oil and gasoline demand will remain weak.
Oil prices retreated from positive territory immediately after the report's release. Light, sweet crude for August delivery fell $1.73, or 1.8%, to $96.94 a barrel on the New York Mercantile Exchange. The contract earlier traded as high as $99.18 a barrel.
The release had a stronger impact on Nymex prices, the benchmark widely used in the U.S. Brent crude on ICE Futures Europe, the European benchmark, recently fell 55 cents, or 0.5%, to $118.04 a barrel.
Futures slumped after the Labor Department said nonfarm payrolls rose 18,000 in June, well below the 125,000 expected by economists surveyed by Dow Jones Newswires. Unemployment rose to 9.2% from 9.1% the previous month, while payrolls data from the previous two months were revised downward.
"The market had anticipated something far better than what we saw," said Andy Lipow, head of the Houston consultancy Lipow Oil Associates. "I think it's going to give a lot of people pause about a second recovery in both the equity market and the commodity market."
The report, the most important reading on U.S. employment levels, sent tremors throughout markets. Dow Jones Industrial Average futures plunged nearly 1% immediately after the 8:30 a.m. EDT release. Gold futures, widely viewed as a safehaven, vaulted to positive territory.
Oil market participants have been closely watching readings on U.S. employment levels for signs that people are returning to work -- thus driving more and using more energy -- in the world's largest crude consumer.
Concerns that the U.S. recovery remains weak have been a major reason Nymex oil prices have had trouble returning to the $100-a-barrel mark recently. The contract last saw that level in June, but it has sold off in part due to concerns that high energy prices themselves were weighing on the recovery.
On Thursday, a pair of more upbeat readings on the U.S. jobs picture helped propel crude to its highest level in nearly a month. Analysts said those readings, including a report on private payrolls and another on weekly jobless claims, heightened expectations for better payrolls data on Friday. When they didn't come, the market sold off sharply.
"As a result of the (private payrolls) report ... the market bias ahead of today's release was higher," wrote Jason Schenker, president of the Austin consultancy Prestige Economics, in a report. "Since markets had been expecting a solid report, a number of markets are likely to move lower today on the back of this report."
Front-month August reformulated gasoline blendstock, or RBOB, recently fell 2.71 cents, or 0.9%, to $3.0999 a gallon. August heating oil gave up 0.65 cent, or 0.2%, to $3.0955 a gallon.