Fitch cut Spain’s credit ratings minutes after downgrading Italy, saying the intensification of the euro zone debt crisis has hurt the entire region.
“Each downgrade is a more visible acknowledgment of the problems,” said Tim Evans, energy analyst for Citi Futures Perspective in New York.
Brent and US crude futures remained on pace to post weekly gains. Both contracts had risen in early trade on supportive US jobs figures, though gains were limited because the return of striking workers boosted the jobs data.
“And the larger difficulty with the employment numbers is that even 100,000 additional jobs is still not a great number,” Evans said.
Brent crude for November fell 50 cents to $105.23 a barrel by 1:51 p.m. (1751 GMT), having swung between $104.37 and $106.64.
US November crude fell 62 cents to $81.97 a barrel, having traded between $81.36 and $84.
Trading volumes were tepid, under half million lots traded for both Brent and US crude in afternoon trading in New York.
Brent volume was 22 percent and US 26 percent below 30-day averages.
Nonfarm payrolls in the US rose by 103,000 in September, versus forecasts for 60,000, and job gains for the prior months were revised higher.
But part of the strength of September’s jobs number reflected the return of 45,000 Verizon Communications workers who had dropped off payrolls in August due to a strike.
Excluding those workers, payrolls increased by 58,000, just missing expectations.
“The market rallied on the positive number, but if you eliminate the Verizon workers returning you get additions much closer to expectations,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
“And after this week’s correction higher you may be seeing some stalling because there still is uncertainty about economic growth going forward,” McGillian added.
US equities on Wall Street also fell after Fitch’s downgrades unsettled investors already worried ahead of a European summit on Sunday that is aimed at shoring up the region’s financial sector.
The euro fell against the dollar after the Fitch actions, snapping a four-day advance.
The dollar index reversed and strengthened, adding to the pressure on dollar-denominated oil prices.
Both Brent and US crude posted strong gains the previous two sessions, supported on Thursday by plans to shore up the region’s banks from the Bank of England and the European Central Bank.
“If you flood the market with liquidity, that liquidity has got to go somewhere,” said Michael Hewson, an analyst at CMC Markets.
“(The moves by the two central banks) have made people think it’s only a matter of time before the Fed follows suit. Ithink they could be waiting a long time for that to happen.”
Before falling back after the Fitch news, oil had recovered from lows on Friday after being pressured when Moody’s cut its ratings on British banks Lloyds and Royal Bank of Scotland and said the British government would have to continue to support the country’s systemically important financial institutions.
