london July 6, 2012, 19:13 IST
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london 07 06, 2012, 19:20 IST
Oil fell towards $98 a barrel on Friday as concern spread over the health of the U.S. economy and investors expected the Norwegian government to end an oil workers' strike.
U.S. employers hired at a disappointing rate in June, upping the pressure on the Federal Reserve to take more action to boost the economy of the world's biggest oil consumer.
"People were looking for something better, some indicator that may show we're crawling out of this trough," said Nigel Gault, Chief U.S. economist at IHS Global Insight. "But everything here says we're still in it."
Brent dropped $2.38 to $98.32 by 1251 GMT, while U.S. crude was down $2.61 at $84.63.
Action by central banks in China, the euro zone and Britain on Thursday had already underscored concerns over the fragility of the global economy that has muddied the demand outlook for commodities.
"China's rate cut was a surprise and although it was meant to stimulate, it was interpreted as a sign of more trouble in the economy and it didn't really inspire," said Victor Shum, a senior partner at oil consultancy Purvin & Gertz.
Worries about supply from Norway drove Brent to a one-month peak above $102 per barrel on Thursday, but prices gave up gains as the euro slid against the dollar after the European Central Bank cut rates.
Adding to the bearish tone, the head of the International Monetary Fund voiced concern over the deterioration of the world economy, saying the IMF will downgrade some of its forecasts.
OSLO INTERVENES
Norway's government will wade into a dispute between offshore oil workers and employers over pensions - calling a meeting for 1600 GMT on Friday - to force an end to a strike that has oil markets on edge.
The strike, which began on June 24, has already slowed crude exports and cut Norway's oil production by around 13 percent and its gas output by around 4 percent. Norway's oil industry upped the ante on Thursday, calling for a lockout on July 9.
"This affects all Norwegian off-shore oil production ... However, it also increases the likelihood of the Norwegian government intervening to end the strike," said Commerzbank.
"It is not therefore surprising that the price increase has not been sustained."
