Thursday, Apr 14, 2011


 
   By Jerry A. DiColo 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Crude futures were slightly lower Thursday after a rise in U.S. jobless claims kept traders on edge about the economy's ability to deal with higher fuel costs.

Light, sweet crude for May delivery recently traded 26 cents, or 0.3%, lower at $106.85 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 51 cents lower at $122.37 a barrel.

U.S. jobless claims rose to the highest level in two months last week, the Labor Department said Thursday, unnerving oil traders that fear any hiccups in the economic recovery will pressure fuel demand. New claims increased 27,000 to 412,000.

After a brief rebound Wednesday, oil prices are continuing their march lower from two-and-a-half year highs above $113 a barrel last week. Investors are concerned that the high cost of oil and other raw materials is starting to weigh on the economy and force cutbacks in fuel usage by businesses and consumers.

"The market is turning to demand worries due to elevated price levels," said Gene McGillian, a broker with Tradition Energy. "There is a pretty good possibility that we could see a further retreat."

Earlier this week, the Paris-based International Energy Agency warned of weakening fuel usage, and the Organization of Petroleum-Exporting Countries cut its demand-growth estimates for this year.

Regular gasoline is selling for $3.81 a gallon on average in the U.S. according to the American Automobile Association, inching close to the $4 a gallon level economists say will change people's driving habits and lower fuel usage.

But supplies of gasoline are falling--U.S. inventories dropped by 7 million barrels last week, according to the Department of Energy. And continued unrest in the Middle East is keeping the oil market on edge.

In Libya, fighting between rebels and pro-regime forces has reached a stalemate, with neither side appearing able to gain the upper hand.

It remained unclear whether conditions in the North African nation will indefinitely keep the bulk of Libyan oil from the international market.

Rebel forces have announced that they are producing hundreds of thousands of barrels of oil a day and are able to export limited amounts. On Tuesday, Qatar said it had helped the rebels market one million barrels of crude.

But this is still a far cry from the 1.3 million barrels of oil a day that Libya was exporting prior to the outbreak of violence in the country.

Front-month May reformulated gasoline blendstock, or RBOB, recently traded 0.85 cent higher at $3.2509 a gallon. May heating oil recently traded 1.17 cents lower at $3.2044 a gallon.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com.

Sarah Kent contributed to this report

(END) Dow Jones Newswires

April 14, 2011 09:25 ET (13:25 GMT)