Oil slides 2.4pc on US demand concerns

Light, sweet crude for July delivery settled down $US2.41, or 2.4 per cent, to $US100.29 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange, which has traded above $US100 a barrel since February, settled down $US2.20, or 1.9 per cent, to $US114.53 a barrel.

Crude ended lower after the ISM manufacturing index fell short of expectations, indicating growth in the energy-intensive manufacturing sector has not been as fast as economists expected. The index fell to 53.5 in May, compared with a forecast for 57. Readings above 50 indicate growth.

April's reading came in at 60.4.

"The manufacturing sector had been a big engine for growth," said Andy Lebow, senior vice-president for energy at MF Global. "It's very significant on the diesel (demand) side."

A separate report said the US private sector hired 38,000 new workers last month, well below the 190,000 expected by economists. The report, by payroll giant Automatic Data Processing and consultancy Macroeconomic Advisers, is also prompting worries about oil demand in the world's largest crude consumer.

"Soft data is what caused all this to happen, started the slide," said Mark Waggoner, president of Excel Futures.

The disappointing jobs reading comes ahead of the most closely watched report on US employment levels, the non-farm payrolls report, due on Friday.

Several reports have suggested the US economy struggled in May. Regional factory reports were weak, jobless claims remained high, and the Conference Board's consumer confidence index fell sharply last month.

Today's decline wiped out yesterday's gains. Oil futures rose more than 2 per cent yesterday on reports that European countries appeared closer to another bailout of Greece, as well as on the outage of TransCanada's Keystone pipeline network.

The pipeline network connects heavy oil fields in Alberta with the Nymex delivery point of Cushing, Oklahoma. Less oil flowing into Cushing is seen as easing the supply glut at the oil hub and supporting the Nymex contract.

The pipeline remained down for repairs today, spokesman Terry Cunha said.

Source.