Oil falls to $76
Oil slid for a third day on Friday toward $76 as stock markets in Asia fell after disappointing U.S. economic indicators, while a potential Atlantic storm provided some support to prices.
Japan’s Nikkei average shed almost 3 percent on Friday, after reports showing U.S. industrial production slowed sharply last month and manufacturing output snapped a three-month streak of increases capped Wall Street gains on Thursday.
But there was some positive economic news as U.S. claims for jobless benefits tumbled to a near two-year low last week.
An oceanic weather system in the central Caribbean had a 10 percent chance of strengthening into a tropical cyclone over the next two days, the U.S. National Hurricane Center said. It was days away from potentially entering the oil-rich Gulf of Mexico.
“Given that the economic outlook is mixed, the key will be the weather as we head into the hurricane season,” said Jonathan Barratt, managing director at Commodity Broking Services in Sydney, adding that prices could reach $80 as soon as next week.
U.S. crude for August fell 14 cents to $76.48 a barrel by 0701 GMT (3:01 a.m. EDT), extending Thursday’s slide of more than 0.5 percent. The contract was heading for its second consecutive weekly increase, trading a few cents higher than last Friday’s close.
Prices have traded in a range between $71 and $80 for almost six weeks as volatility related to the European debt crisis dwindled. Over the year, they have stayed within a $23 range, hitting a 19-month peak above $87 and a trough below $65, both in May.
The market’s attention will be on U.S. consumer prices and the Reuters-University of Michigan sentiment index due out later on Friday.
CONTANGO RETURNS
ICE Brent for September, the front-month contract after August expired on Thursday, fell 17 cents to $75.92. As August went off the board, the Brent market returned to a contango structure.
Brent futures earlier this week had flipped into backwardation, largely reflecting a drop in supply of North Sea crude grades in August because of oilfield maintenance, analysts said, rather than a tightening of the global market.
Oil fell on Thursday after China, which is leading global demand growth as the world’s second-largest oil consumer, said annual gross domestic product growth moderated to 10.3 percent in the second quarter from 11.9 percent in the first quarter.
“The slowdown in China’s economy would have been the telltale sign for the price to move lower, but the market has absorbed it,” Barratt said. “Given the state of the economy, inventories will continue to be drawn.”
U.S. crude inventories fell about 5 million barrels for the second week in a row last week, government statistics showed two days ago.
But Energy industry data provider Genscape on Thursday said crude stockpiles at the key U.S. Cushing, Oklahoma oil hub, the pricing point for crude trading on the New York Mercantile Exchange, rose in the week to July 13 to 39.93 million barrels.
BP Plc said on Thursday it stopped the flow of oil into the Gulf of Mexico from its deep-sea well for the first time since it ruptured in April, prompting hope that the leak can be plugged for good.
The U.S. Congress on Thursday approved the broadest overhaul of financial rules since the Great Depression and sent it to President Barack Obama to sign into law.
Source: Reuters