LONDON, Aug 7 – Oil prices pulled back on Friday in-line with stock markets as traders awaited US jobs data that may provide clues for future crude demand.
Brent North Sea crude for delivery in September dropped 43 cents to 74.40 dollars a barrel, after touching 76.00 dollars on Thursday, its highest level for 10 months.
New York\’s main contract, light sweet crude for September, slid 58 cents to 71.36 dollars a barrel, after reaching a five-week high of 72.42 dollars on Thursday.
"Oil is retreating a bit and that\’s not surprising considering" stock markets are down, said Victor Shum, senior principal at energy consultancy Purvin and Gertz.
"Oil has followed equities for quite a few months."
Despite crude prices staying above 70 dollars, Shum said caution remains in the oil market because of weak energy demand from major economies hit by the global economic downturn.
"The market fundamentals really do not provide support to the current price levels which look vulnerable," he said.
Oil prices rallied this week as a weakening dollar made crude futures an attractive investment option, traders said.
Crude futures are priced in the US currency and become cheaper when the dollar falls.
Investors were awaiting the release of the US jobs report for July.
Most economists expect the data will show the unemployment rate climbed to 9.6 percent, from a 26-year high of 9.5 percent in June, and the economy shed 328,000 non-farm jobs.
Data released on Wednesday by the US Department of Energy (DoE) painted a mixed picture of oil demand in the United States, the world\’s biggest energy user.
The widely-monitored DoE report said US crude oil stockpiles soared by 1.7 million barrels in the week ending July 31, three times more than the average analyst projection.
Inventories of distillates, which include diesel and heating fuel, sank by 1.1 million barrels, instead of the 900,000-barrel increase expected.
Gasoline reserves fell by 200,000 million barrels, far less than the drop of 1.3 million barrels anticipated.
Just over a year ago, oil prices had struck record peaks above 147 dollars a barrel on worries about potential supply disruptions. But over the past 12 months, prices nosedived, striking 32 dollars in December before clawing back ground in recent months.
While demand for crude remains weak amid worldwide recession, a leading economist earlier this week warned that supplies faced a bleak future.
A disastrous energy crunch is looming because most of the major oil fields in the world have passed their peak production, said Fatih Birol, chief economist with Paris-based International Energy Agency.
In an interview with Britain\’s Independent newspaper, he added that such an "oil crunch" within the next five years could jeopardise recovery from the global recession.