Oil price falls on concerns about global economy

Operations coordinator Doug Rotzien works at the Enbridge Pipelines oil terminal facility in Hardisty, Alta., June 20, 2007. THE CANADIAN PRESS/AP, Larry MacDougal

NEW YORK, N.Y. - Oil prices fell Wednesday on concerns of a weakening European economy and disappointing job growth in the U.S.

Benchmark West Texas Intermediate crude gave up 86 cents to US$105.30 per barrel in afternoon trading on the New York Mercantile Exchange. Brent crude, which helps set the price of oil imported into the U.S., lost $1.35 to $118.31 per barrel in London.

Prices dropped after a survey showed that Europe's manufacturing industry is slowing down. Germany's unemployment figures also increased in April. That's happened only twice in more than two years. A separate report says U.S. businesses added 119,000 jobs in April, far lower than the 201,000 added in March.

Oil and natural gas demand has been declining this year in the U.S. and Europe, and it could fall further if their economies struggle.. The U.S. is the world's largest oil consumer. Europe uses nearly a fifth of the world's oil.

The Energy Department's Energy Information Administration also reported on Wednesday that U.S. oil supplies grew slightly more than expected last week, while demand fell nearly 2 per cent. The nation's crude inventories increased by 2.8 million barrels from the previous week, to 375.9 million barrels in storage. At the same time, gasoline supplies dropped by 2 million barrels.

The EIA report said wholesale demand for gasoline was down almost 5 per cent from a year ago, as many motorists continue to be careful about how much they drive and fill up their tanks.

In other energy futures trading, heating oil fell by 3.53 cents to $3.1418 per gallon, gasoline fell by 1.92 cents to $3.0779 a gallon and natural gas lost 10 cents at $2.27 per 1,000 cubic feet.