(Bloomberg News) Oil dropped as an employment report raised concern that U.S. fuel demand will slow and Iran agreed to resume talks on its nuclear program.

Futures fell as much as 1.7 percent after the government reported on April 6 that the U.S. created 120,000 jobs in March, less than the median forecast of 205,000 in a Bloomberg survey. Negotiations between Iran and the United Nations Security Council members plus Germany are scheduled to start April 14, easing concern that supplies will be disrupted.

"The pretty weak jobs numbers Friday are the main reason we are down so much," said Chris Dillman, an analyst and broker at Tradition Energy in Stamford, Connecticut. "Prices are also down because of the talks this week in Istanbul between Iran the members of the UN Security Council and Germany."

Crude for May delivery fell $1.99, or 1.9 percent, to $101.32 at 9:19 a.m. on the New York Mercantile Exchange. Prices have climbed 2.5 percent this year.

Brent oil for May settlement dropped $1.66, or 1.3 percent, to $121.77 a barrel on the London-based ICE Futures Europe exchange.

Commodity and equity markets were closed in New York and London on April 6 for the Good Friday holiday. European stock markets are shut today for holidays, along with Australia, New Zealand, Hong Kong, Thailand and South Africa.

"Volume is very light because markets are shut in Europe, Australia and Hong Kong," Dillman said. "This is probably exaggerating the size of moves."

Five Months

The U.S. employment increase was the smallest in five months. The data also showed the unemployment rate fell to 8.2 percent as people left the labor force, while workers put in fewer hours.

Iran and the representatives of the six nations will meet for nuclear talks starting April 14 in Istanbul, Michael Mann, a European Union spokesman, said yesterday. Their last meeting was in January 2011. The government in Tehran is under increasing economic pressure from trade, financial and energy sanctions, including U.S. penalties on banks that process payments for Iranian crude.

President Mahmoud Ahmadinejad said Iran will continue its nuclear course even if the whole world stands opposed, state-run Al Alam TV reported today.

Consumer prices in China rose 3.6 percent from a year earlier after gaining 3.2 percent in February, the National Bureau of Statistics said on its website today. That was more than the median 3.4 percent estimate in a Bloomberg survey of 33 economists. Faster inflation may limit the government's options to stimulate growth in the second-largest oil-consuming country.

Speculator Bets

Speculators reduced bullish bets on oil by the most in more than three months as U.S. output grew to the highest level since 1999, boosting stockpiles, according to the Commodity Futures Trading Commission's Commitments of Traders report on April 6. Money managers reduced net long positions, or wagers on rising prices, by 10 percent in the seven days ended April 3, for the biggest drop since Dec. 20, the report showed.

Hedge funds and other money managers cut bullish bets on Brent crude by 11,809 contracts in the week ended April 3, according to data from ICE exchange. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 139,074 lots, ICE said today in its weekly Commitment of Traders report.