Commodity Corner: Oil Sinks on Econ Slowdown Signs
Lackluster economic data contributed to a drop in crude oil futures Wednesday, reflecting fears that demand for the commodity will decrease.
Crude oil for July delivery fell $2.41 to settle at $100.29 a barrel after two closely followed indicators suggested that U.S. economic growth is becoming more sluggish. The Institute for Supply Management (ISM) announced that its Purchasing Managers' Index (PMI) for May fell 6.9 percentage points lower than April's figure of 60.4 percent.
Last month's 53.5 percent statistic marks the 22nd consecutive month of growth in the manufacturing sector, but it represents the lowest PMI reading in 12 months and the first one to fall below 60 percent this year. ISM cautioned that supplier deliveries are slower and inventories are contracting. New orders, production, and employment continue to grow but at slower rates.
On the employment front, payroll processing firm ADP reported Wednesday that total U.S. private-sector employment grew by 38,000 jobs in May—well below what analysts were expecting. According to ADP, small and medium businesses added 27,000 and 30,000 jobs, respectively, during the period. Meanwhile, large businesses shed 19,000 jobs and the manufacturing industry cut 9,000 jobs.
"Although we continue to see jobs being added to the economy, this month's job figures show that employers believe we are not out of the woods yet when it comes to decisions on hiring," ADP President and Chief Executive Officer Gary C. Butler said in a company statement.
July crude oil traded within a range from $99.96 to $103.31 Wednesday.
The gasoline futures price, which often parallels the movement of the oil price, lost 17 cents to end the day at $2.98 a gallon. July gasoline peaked at $3.06 and bottomed out at $2.97.
July natural gas lost four cents to settle at $4.63 per thousand cubic feet. The July contract price fluctuated from $4.59 to $4.68.