Oil slips on slow growth of US service industries

New York: Crude oil fell last week after service industries grew in August at the weakest pace in seven months, bolstering concern that the US economic rebound will slow.

Futures slipped after the Institute for Supply Management's index of non-manufacturing business, which covers about 90 per cent of the economy, fell to 51.5 in August from 54.3 the prior month. It was the smallest gain since January. Prices rose earlier when a government report showed companies in the US added more jobs in August than forecast.

Mixed outlook

"Prices are still pretty lofty, given supply and the economic backdrop," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "The economic outlook is at best mixed."

Crude oil for October delivery declined 42 cents (Dh1.5), or 0.6 per cent, to settle at $74.60 a barrel on the New York Mercantile Exchange on Friday. Futures slipped 0.8 per cent last week.

There will be no floor trading on the Nymex on September 6 because of the US Labour Day holiday, and all electronic trades will be counted as part of the September 7 session.

Brent crude oil for October settlement slipped 26 cents, or 0.3 per cent, to end the session at $76.67 on the London-based ICE Futures Europe exchange.

The Labour Department said private payrolls advanced by 67,000, after a revised 107,000 increase in July. Overall employment fell 54,000 for a second month. The unemployment rate rose to 9.6 per cent.

"We had two pieces of critical economic data on the Friday before the Labour Day weekend," said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. "Prices were bid up after the payroll number, and when the ISM came out investors sold off."

Futures dropped as US officials investigated the cause of a fire yesterday on a Mariner Energy Inc oil and natural-gas platform in the Gulf of Mexico that drew parallels with the BP Plc spill. Oil rose 1.5 per cent yesterday on concern the blast would increase regulations and cut output.

"Today's move is more of a function of how overbought we were yesterday than anything else," said Stephen Schork, president of consultant Schork Group Inc in Villanova, Pennsylvania.

"Prices climbed after the Mariner explosion yesterday and word that there was a sheen of oil on the water. It now looks like it was an overreaction."

The Mariner fire was put out, all 13 crew members were rescued unhurt and aircraft were scanning the ocean for any oil spill, US Coast Guard Captain Peter Troedsson said yesterday.