Oil dives 2.5 percent, biggest weekly drop since November

Fri May 4, 2012 5:04pm EDT
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By Matthew Robinson and Jonathan Leff

NEW YORK (Reuters) - Oil tumbled 2.5 percent on Friday, with U.S. crude below $100 a barrel for the first time since February, as an abrupt slow-down in U.S. hiring soured economic sentiment and technical triggers intensified selling.

Brent's slide of nearly $3 a barrel took losses on the week to more than 5 percent, the deepest sell-off since November, rattling traders who had been lulled by low volatility this year.

While a downbeat U.S. jobs report weighed, traders said a combination of less definitive factors -- from confusion over margin changes to the breach of Brent's 200-day moving average -- compounded selling. Some dealers were reminded of the abrupt $10 collapse in prices on May 5 last year.

"We have broken through key technical levels here after a disappointing employment report and the PMI number from Europe which suggest that the recovery is stalling and could affect energy consumption," said Gene McGillian of Tradition Energy.

This week's quickening rout has effectively erased any "Iran premium" from the market, suggesting that concerns over a darkening economic outlook were taking precedence over worries about reduced exports from OPEC's second-largest producer.

Prices for international benchmark Brent have tumbled $15 from their 2012 high of $128.40 a barrel, struck on March 1. June Brent futures fell $2.90 to settle at $113.18 a barrel.

Brent dropped as low as $111.76 a barrel before trading on the contract's premium to U.S. futures pushed the spread out to $14.93 a barrel in late activity, up more than $1 from Thursday's levels.

U.S. crude dropped nearly 4 percent, off $4.05 to settle at $98.49 a barrel, breaking below $100 for the first time since February. U.S. crude posted a 6.1 percent weekly loss.   Continued...

A motorist prepares to put fuel into her car at a petrol station in Melbourne July 3, 2008. REUTERS/Mick Tsikas