Oil retreats in Asia, New York crude holds above 71 dollars

SINGAPORE, Aug 7, 2009 (AFP) - Oil pulled back in Asia on Friday as regional stock markets eased and investors awaited a US report on unemployment which could give fresh clues on the health of the recession-hit economy.

New York's main contract, light sweet crude for September, was down 26 cents to 71.68 dollars a barrel, after hitting a five-week high of 72.42 dollars on Thursday.

Brent North Sea crude for delivery in September tumbled 29 cents to 74.54 dollars a barrel after briefly touching 76.00 dollars Thursday, its highest level this year.

"Oil is retreating a bit and that's not surprising considering that Asian equity markets are also easing," said Victor Shum, senior principal at energy consultancy Purvin and Gertz in Singapore.

"Oil has followed equities for quite a few months already."

Shum said however there is still caution 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.

Investors were also awaiting the release Friday by the US Labor Department of the July jobs report which analysts expect will provide a fresh indication of the prospects for recovery for the world's biggest economy, Shum said.

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.

Source: AFP

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