Oil slips after Fed revises down economic outlook

By Brian Ellsworth

NEW YORK (BestGrowthStock) – Oil prices slipped to around $77 per barrel on Wednesday in volatile seesaw trading as bearish economic news outweighed bullish U.S. crude inventory data.

Oil fell in afternoon trading following U.S. Federal Reserve minutes showed concern about the economic outlook, dropping from earlier highs after the U.S. government reported that crude fell stocks at more than triple the rate analysts had projected.

U.S. crude settled down 11 cents at $77.04 after rising as high as $78.15. Crude hit a low of $76.38 before the bullish crude inventory data was released. Brent crude ended up 12 cents at $76.77.

“Crude futures turned negative after the release of the minutes of the most recent Fed meeting on the lower growth outlook,” said Chris Dillman, analyst, Tradition Energy, Stamford, Connecticut.

“But I don’t think the revisions are big enough to warrant a deeper decline here in crude futures.”

Members of the Federal Reserve felt last month they should be ready to consider additional steps to boost the U.S. economy if an already softening economic outlook took a turn for the worse.

That added to other bearish news for oil, including data showing a decline in U.S. retail sales and a surprise jump in U.S. gasoline and distillate inventories.

Earlier in the session, a report by the U.S. Energy Information Administration showed crude stocks falling by 5.06 million barrels.

Crude traders may get further direction on Thursday when the U.S. Department of Labor reports weekly jobless claims that could provide further details on the state of the economic recovery.

Brent crude August delivery contracts will expire on Thursday, which may add volatility to the session because speculative buyers, who generally only trade futures contracts rather than physical oil, have to sell their contracts.

The Dow Jones industrial average (.DJI: ) unofficially closed up 0.04 percent while the S&P 500 Index (.SPX: ) unofficially closed down 0.02 percent. The indexes dipped to session lows shortly after the release of the Fed’s June meeting minutes. (.N: )

Crude and U.S. equities have become more closely correlated this month. Investors often see the strength of equities as an indication of wider economic health and future demand for oil and energy. (Graphic http://link.reuters.com/sur57m)

(Additional reporting by Alejandro Barbajosa, David Turner, Alex Lawler and Robert Gibbons; Editing by Marguerita Choy)

Oil slips after Fed revises down economic outlook