Commodity Corner: Jobs, Services News Put Damper on Oil

A report showing slower growth in the U.S. services sector in August contributed to a lower crude oil price Friday.

The price of a barrel of crude oil for October delivery settled 42 cents lower to $74.60 after the Institute for Supply Management (ISM) reported Friday that its Non-Manufacturing Index (NMI) slipped 2.8 percentage points to 51.5 last month. An NMI above 50 signifies a growing economy, but the lower figure for August is below the 52.3 average for the past 12 months. The ISM reported slower growth in the categories Business Activity/Production, New Orders, Supplier Deliveries, Inventories, Backlog of Orders, and Imports. Also, the latest NMI report reveals contracting Employment (a 2.7-percentage point drop to 48.2 in August) and increasing prices (up 7.6 percentage points to 60.3).

Contributing to the pessimism about the direction of the U.S. economy was the U.S. Department of Labor, which on Friday announced that the country's unemployment rate inched up to 9.6% in August a 0.1% increase from the previous month. The department's Bureau of Labor Statistics announced that nonfarm payroll employment fell by 54,000 and that government employment in this case, primarily temporary census workers -- decreased by 114,000. Private-sector payroll employment, however, did grow by 67,000.

Crude oil traded from $73.20 to $75.44 Friday. In addition, oil ended the week 10 cents lower compared to Monday's settlement price.

The price of natural gas closed in on the $4 mark Friday but fell short, settling at $3.94 per thousand cubic feet. A sentiment that natural gas is undervalued compared to coal helped to propel the October futures price 13 cents higher for the final day of trading before the Labor Day weekend. Despite Friday's rally, however, gas ended the week up 13 cents.

The intraday range for natural gas was $3.76 to $3.86.

Gasoline remained flat Friday, settling at $1.92 a gallon for the second day straight. Gasoline, which traded from $1.87 to $1.93, is down a penny for the week.