Oil falls as tepid U.S. jobs growth disappoints

A worker pumps petrol into a customer's plastic bottles at a petrol station in Cuevas del Becerro, near Malaga, southern Spain March 4, 2011.

NEW YORK (Reuters) - Brent crude prices fell sharply on Friday after a report showing tepid U.S. jobs growth in June reinforced concerns that a sluggish global economy will curb demand for petroleum.

U.S. crude fell more than 3 percent and posted a 51-cent weekly loss, while an oil-workers strike in Norway and rising tensions over Iran's disputed nuclear program allowed Brent crude prices to record a 39-cent weekly gain, based on settlement.

Norway's oil industry and labor unions agreed to restart negotiations o n Saturday at the request of the government.

Crude futures briefly pared losses on the news that the government chose not to intervene, hoping the parties can resolve the dispute themselves. Some analysts had expected Oslo to act quickly to return striking workers to their jobs after industry's threat of a lockout.

U.S. employers added only 80,000 jobs in June, 10,000 fewer than analysts expected, and the unemployment rate remained at 8.2 percent, fuelling fears Europe's debt crisis was shifting the U.S. economy into a lower gear.

"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 August crude fell $2.51 to settle at $98.19 a barrel, with the $97.73 low recorded in post-settlement trading.

U.S. August crude slumped $2.77 to settle at $84.45 a barrel, down 0.6 percent for the week and falling as low as $84.02 in post-settlement trading.

Brent's premium to U.S. crude increased to $13.73 a barrel, based on settlement prices, as the Norway oil workers strike and the potential threat to supply from Middle East tensions provide more support to Brent.

Thin volumes characterized trading for both Brent and U.S. crude, with total volumes for both contracts below 30-day averages.

U.S. refined products futures slipped in tandem with crude oil, with heating oil losing more than 5 cents and RBOB gasoline dropping nearly 5 cents.

The Commitments of Traders reports from the U.S. Commodities Futures Trading Commission has been delayed until Monday at 3:30 p.m. EDT (1930 GMT) due to this week's U.S. Independence Day holiday.

Commodities tumbled on Friday by their most this year, eroding their second successive weekly gain after dismal U.S. jobs data fueled worries about the global economy and raw materials demand.

The Thomson Reuters-Jefferies CRB index .CRB fell 2.2 percent to 286.92, the biggest one-day decline since December, knocking down the weekly gain to just under 1 percent. The loss curbed one of the biggest, broad-based commodities rallies on record; from June 29 until Thursday, the CRB was up nearly 8 percent.

Monetary easing by central banks in China, the euro zone and Britain on Thursday had underscored concerns about a fragile global economy that has muddied the demand outlook for commodities.

"The latest jobs data also underscores the weakness that has emerged in the global economy," said Gene McGillian of Tradition Energy, Stamford, Connecticut.

"With the economies of China and Europe also weakening, this spells lower global demand for energy."

The disappointing jobs report kept intact hopes that the U.S. Federal Reserve will move to bolster a sputtering economy.

Adding to the bearish tone, the head of the International Monetary Fund voiced concern over the deterioration of the global economy, saying the IMF will downgrade some of its forecasts.

Additional pressure on dollar-denominated oil prices came from the weak dollar .DXY.

The euro slumped to a two-year low against the dollar as the U.S. jobs report added to concerns that Europe's debt crisis is weighing on U.S. economic growth and stoked strong risk aversion and a flight to safe havens.

The downdraft from the disappointing job additions sent U.S. stocks lower, with the S&P 500 index posting a weekly loss.

NORWAY OIL INDUSTRY, UNIONS TO MEET

Norway's oil industry and labor unions agreed to meet on Saturday with a state mediator to make another attempt at reaching a deal to end a strike that has cut oil output by 13 percent and natural gas production by 4 percent and threatens to cut off exports.

Industry upped the ante on Thursday, calling for a lockout from July 10, a move that many analysts thought boosted the chances of intervention by Oslo to end the dispute.

That threat to North Sea production comes amid the start of the European Union's embargo on Iranian oil that started on July 1, as part of the West's effort to hem in Tehran's disputed nuclear ambitions.

Iran has seen crude exports fall sharply from year-ago levels as the West tightens sanctions.

(Additional reporting by Gene Ramos in New York, Peg Mackey in London and Ramya Venugopal, Luke Pachymuthu and Jessica Jaganathan in Singapore; Editing by Bernadette Baum, Marguerita Choy and Sofina Mirza-Reid)