Oil rises towards $76 per barrel on weaker dollar
The economy of Japan, the world’s third-largest oil user, slowed to a crawl in the second quarter, up a smaller-than-expected 0.1 percent, knocking down the Nikkei by about 1 percent and adding to concerns about a faltering recovery in some major oil consuming nations.
This follows a string of tepid U.S. macroeconomic indicators last week that forced oil prices down by more than 6 percent, the biggest weekly drop since early July.
“A lot of economic data from the U.S., the euro zone and even from Japan will have some effect on crude oil, while the currency market will remain an important driver,” Ken Hasegawa, a commodity derivatives manager at brokerage Newedge in Japan, said after the Japanese gross domestic product report.
U.S. crude for delivery in September climbed 20 cents to $75.59 a barrel at 0346 GMT. Prices touched $75.01 on Friday, the lowest level for a front-month contract since July 13.
“It’s easy to go down below $75, it’s not so big support,” Hasegawa said. “But the market is still technically supported above $70.”
The dollar weakened more than 0.2 percent against a basket of currencies on Monday, making oil cheaper for holders of other currencies. Last week, the greenback posted its best week against major currencies in nearly two years.
Data releases on Friday showing a slight rise in U.S. consumer confidence for early August and a small advance in retail sales in July were not enough to sustain confidence in the economy of the world’s top oil consumer.
Oil prices last week also fell because of a rise in U.S. jobless claims and sustained gains in the nation’s fuel inventories, further signs that energy demand is trailing the economic recovery.
But European economic growth accelerated sharply in the second quarter of 2010 as Germany’s best growth performance since reunification more than made up for the struggles of Spain, Ireland and recession-ravaged Greece.
On the weather front, an area of low pressure over southwest Georgia could move southward into Gulf of Mexico waters by early Monday and has a medium chance of becoming a tropical cyclone in the next 48 hours, the National Hurricane Center said late on Sunday.
The low pressure area was the remnant of Tropical Depression Five, which dissipated on Wednesday in the Gulf, home to about 30 percent of U.S. oil production, 11 percent of natural gas output, and more than 43 percent of U.S. refinery capacity.