By Yee Kai Pin and Ben Sharples Dec. 4 (Bloomberg) -- Crude oil fell for a third day after a report showed service industries in the U.S. unexpectedly contracted in November, raising concern fuel demand may be slow to recover from the worst recession since World War II. Oil headed for a second weekly decline after the Institute for Supply Management’s index of non-manufacturing businesses that make up almost 90 percent of the economy slipped to 48.7 from 50.6 in October, the Tempe, Arizona-based group said yesterday. A Labor Department report today will probably show the U.S. economy lost jobs in November. “Oil is under pressure now simply because of the latest economic data out of the U.S.,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The concern is that the unemployment report will also show poor performance. Some of that expectation is now priced into oil.” Crude oil for January delivery fell as much as 85 cents, or 1.1 percent, to $75.61 a barrel in electronic trading on the New York Mercantile Exchange. It was at $75.93 at 1:56 p.m. Singapore time. Yesterday, the contract fell 14 cents to $76.46 a barrel, a four-day low. Prices, up 70 percent this year, are poised for a 0.2 percent weekly decline. The Labor Department may say in a report today U.S. employers dropped 125,000 non-farm workers from their payrolls, according to the median of forecasts from 81 economists surveyed by Bloomberg News. “The ISM non-manufacturing index reading was weaker than expected and that raised some investor anxiety ahead of the employment report,” said Toby Hassall, a research analyst with CWA Global Markets Pty in Sydney. “Policy makers have indicated they see the recovery as being very uneven, and I expect the unemployment rate to stay elevated for an extended period.” Emergency Lending The euro rose against the dollar and the yen after European Central Bank President Jean-Claude Trichet announced yesterday the first steps toward scaling back emergency lending designed to revive the region’s economy. The U.S. currency was little changed after falling to $1.5053 per euro yesterday in New York. A weaker dollar increases the appeal of commodities as an alternative investment. “The weaker dollar has been a very supportive element for oil,” Hassall said. “There is nothing to suggest the longer term downward trend in the dollar is about to break.” Brent crude oil for January settlement fell as much as 82 cents, or 1.1 percent, to $77.54 a barrel on the London-based ICE Futures Europe exchange. The contract traded at $77.99 a barrel at 1:59 p.m. in Singapore. Yesterday, it rose 48 cents, or 0.6 percent, to $78.36 a barrel. Price Survey Oil may decline next week on speculation fuel inventories are sufficient to meet weakening demand, a Bloomberg News survey showed. Twenty-one of 41 analysts and traders, or 51 percent, said futures will drop through Dec. 11. Five respondents, or 12 percent, forecast the market will rise and 15 said prices will be little changed. Last week, 37 percent of survey respondents said oil would climb. The Energy Department Dec. 2 posted increases in U.S. crude oil and gasoline inventories in the week to Nov. 27, while fuel demand slipped 497,000 barrels a day. “Even though the financial factors have been the main drivers of oil pricing, fundamentals do matter,” said Shum at Purvin & Gertz. “The weekly reports of inventory have been holding back further gains in oil.” To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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