Oil ends below $75 on weak U.S. economic data

By Gene Ramos

NEW YORK (BestGrowthStock) – Oil prices closed below $75 per barrel on Thursday, down for a second day in a row, as weak U.S. data fueled worries that the economic recovery is stalling, deepening concerns about demand in the world’s biggest oil consumer.

The decline erased gains brought on early by an upgrade in growth prospects for Germany, Europe’s strongest economy. Losses piled up from Wednesday, when data showed U.S. petroleum inventories soared to a record high.

U.S. September crude settled down 99 cents at $74.43 a barrel, after hitting a low of $73.96.

In London, ICE front-month Brent ended down $1.17 at $75.30 a barrel. Brent’s premium against U.S. crude dropped back to below $1 a day after it rose to $1.39 — the highest since early June.

Factory activity in the U.S. mid-Atlantic region contracted unexpectedly in August for the first time in more than a year, according to the Philadelphia Federal Reserve.

The U.S. Labor Department reported initial claims for state unemployment benefits rose to 500,000 in the week ended August 24, more than expected and the highest since mid-November.

The widely followed leading index of U.S. economic indicators from the private-sector Conference Board rose 0.1 percent in July, in line with expectations. But the June data was revised lower to -0.3 percent from the initial report of -0.2 percent.

“The rise in jobless claims and weaker regional manufacturing report from the Federal Reserve reinforced the perception that the economic recovery is wavering and in an environment of poor fundamentals, with (oil) inventories as high as they are,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

The unexpected rise in U.S. jobless claims sent global markets lower and weakened the dollar, prompting investors to seek safety in U.S. Treasury debt and gold.

Wall Street tumbled as the disappointing jobs and regional manufacturing data added to speculation that the economy may be heading for a more significant slowdown.

The dollar slumped to near a 15-year low against the yen, but rose against the euro. Gold rose to a seven-week high, rallying for the sixth straight day.

On top of the day’s worrisome data, the U.S. economy faces even more difficult times ahead with chronic unemployment and slow manufacturing hurting the recovery, said Douglas Elmendorf, head of non-partisan Congressional Budget Office.

“The U.S. is still by far the largest oil consumer worldwide,” said Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt. “So a dent in sentiment will keep prices under pressure for some time, until we see the recovery of the jobs market in the U.S., because the weak point in the U.S. economy is not corporate earnings, it’s jobs.”

Oil found support early in the session from a rally in equity markets in Asia and Europe after Germany’s central bank upgraded its economic growth forecast for this year.


Even with Thursday’s decline, the U.S. crude benchmark remained above the six-week low of $73.83 touched on Wednesday, when the Department of Energy said total domestic commercial petroleum stockpiles last week jumped to 1.13 billion barrels. It was the highest level since 1990, when the government began reporting weekly data.

Inventories hit a record despite drawdowns in crude oil and gasoline storage, prompting analysts to conclude that supplies were growing faster than demand.

Meanwhile, a report on Thursday from industry data provider Genscape showed that as of August 17 supplies at the key Cushing, Oklahoma, delivery hub fell 985,368 barrels to 38.9 million barrels. The EIA data on Wednesday showed that crude stored at the hub fell 687,000 barrels to 37.04 million barrels in the week to August 13.

(Additional reporting by Robert Gibbons in New York, David Turner in London, Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker)

Oil ends below $75 on weak U.S. economic data