Oil futures sold off sharply Friday after the government said the U.S. economy barely added jobs last month, surprising markets and stoking worries that energy demand is weakening.
Light, sweet crude for August delivery settled down $2.47, or 2.5%, to $96.20 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe, the European benchmark, recently fell 38 cents, or 0.3%, to $118.21 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.
"I wouldn't say we're heading for a double-dip (recession), but it sure makes you think that's a possibility again," said Dominick Chirichella, analyst at the Energy Management Institute in New York.
The report, the most important reading on U.S. employment levels, sent tremors throughout markets. Equities traded sharply lower, with the Dow Jones Industrial Average recently down 0.8% to 12614.30. Gold futures, widely viewed as a safe haven, shot to their highest level in two weeks.
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.
"People staying out of work don't buy gasoline," Chirichella said.
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.
Several reports this week offered mixed picture of U.S. gasoline demand. On Wednesday, a SpendingPulse report from MasterCard Advisors LLC said gasoline demand rose 2.4% last week, bucking two straight weeks of declines. The U.S. Department of Energy said its indirect measure of U.S. fuel consumption rose last week.
However, the department also said average demand for refined fuel over the last four weeks, which takes a longer period of time into account, remains below year-ago levels.
Despite Friday's decline, Nymex crude ended the week 1.3% higher. On Thursday, two better-than-expected U.S. employment readings propelled the contract to its highest level in nearly a month. Those readings heightened expectations for a better payrolls report Friday.
"Everybody was caught leaning the wrong way," said Peter Beutel, head of the oil trading advisory firm Cameron Hanover in New Canaan, Conn.
Separately, Brent crude traded at near-record premium around $22 a barrel to the Nymex contract. Smaller supplies of North Sea crude for August helped support the Brent contract. The disappointing jobs report, meanwhile, weighed primarily on the Nymex contract, the U.S. benchmark.
Historically, the two crudes have traded just a few dollars apart.
Front-month August reformulated gasoline blendstock, or RBOB, settled down 3.44 cents, or 1.1%, to $3.0926 a gallon. August heating oil settled down 0.56 cent, or 0.2%, to $3.0964 a gallon.