Oil futures pared their losses Friday after a better-than-expected reading on U.S. employment levels, easing fears that another recession is underway in the world's largest oil-consuming country.
Light, sweet crude for September delivery recently traded down 47 cents, or 0.6%, to $86.16 a barrel on the New York Mercantile Exchange. Trading was volatile following Thursday's market-wide sell-off, with futures plunging to as low as $82.87 a barrel--their lowest since November--in Asian trading hours.
The contract then rallied as high as $88.32 a barrel immediately after the Labor Department released its closely watched nonfarm payrolls report. Brent crude on the ICE Futures Europe exchange recently traded up $1.30, or 1.2%, to $108.55 a barrel.
"We got a quick little pop and then the market faded right back off again," said Tom Bentz, director at BNP Paribas Commodity Futures in New York. "It's all over the place right now."
The Labor Department said nonfarm payrolls rose 117,000 last month, while the unemployment rate fell to 9.1% from 9.2%. Economists surveyed by Dow Jones Newswires had expected payrolls to rise 75,000 and the jobless rate to remain unchanged.
The report helped ease fears of a double-dip recession in the U.S., which would mean lower demand for crude oil and gasoline. Fears of such a slowdown gripped markets on Thursday, sending crude prices plunging more than 5% to settle at their lowest level since February. Equities and other commodities also plunged.
"There is only one thing looking worse than a chart of crude oil and that is a chart of [the] S&P 500," Olivier Jakob, head of Swiss oil consultancy Petromatrix, said in a research report.
Stocks rose initially, but were recently trading lower. The Dow Jones Industrial Average was recently off 0.3%
Separately, a fire at a refinery owned by Valero Corp. (VLO) could lend some support to gasoline futures. The company said the fire at its 195,000-barrel-a-day facility in Memphis, Tenn, forced the shutdown of two of its crude distillation units.
Front-month September reformulated gasoline blendstock, or RBOB, recently traded up 2.81 cents, or 1%, to $2.7653 a gallon.
Despite Friday's upbeat report, several signs still suggest that the U.S. economic recovery remains weak, with some 14 million people who would like to work still without employment. More worrisome to crude-market watchers are signs that gasoline demand--which typically peaks in the summer--is weakening.
Thursday's decline wiped out all of the year's gains in Nymex crude prices. After starting the year at $91.38 a barrel, the U.S. benchmark soared to nearly $115 in May due to rising demand from emerging markets like China and concerns about upheaval among oil exporters in the Middle East and North Africa. Brent crude, widely seen as more reflective of global supply and demand, soared as high as $127 a barrel.
But the market's attention has shifted back to the developed world in recent weeks, and futures have sold off due to signs of economic strain in the U.S. and the sovereign-debt crisis roiling Europe.
September heating oil traded up 3.18 cents, or 1.1%, to $2.9258 a gallon.