Oil price steady below $75 per barrel
Crude was steady near a six-week trough below $75 a barrel, after weak U.S. economic data signaled the world’s top oil-consuming nation will struggle to work through the most ample petroleum inventories in two decades.
U.S. crude for September, the front-month contract expiring at the end of Friday trading, added 14 cents to $74.57 at 0645 GMT, and was heading for a second consecutive week of losses.
The more active October contract, which will become the front month from Monday, gained 8 cents to $74.85, while ICE Brent for October rose 24 cents to $75.54.
The frail U.S. economy received fresh setbacks on Thursday as data showed new U.S. jobless claims scaled a nine-month high last week and mid-Atlantic manufacturing shrank in August for the first time in more than a year, sending Wall Street lower.
Japan’s Nikkei average fell 2 percent on Friday on worries of a deepening slowdown, while the dollar stayed within reach of a 15-year low against the yen, as investors fled risk. .T
“Financial market trends are quite an important factor,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. “Both the money flow and the fundamental side are quite negative for the oil market now.”
Front-month U.S. crude settled below $75 on Thursday for the first time since July 12, after touching a trough of $73.83 on Wednesday, the lowest intraday price since July 7.
The contract is now the closest to being oversold it has been in three months. For a graphic on WTI’s relative strength index:
“In the short term, the market is probably oversold, so short covering is happening at the moment,” Emori said, referring to sporadic price rebounds during Friday’s trading session.
A deteriorating U.S. labor market and slowing manufacturing activity may restrain growth in oil demand at a time when the country’s total petroleum inventories are at a record high level according to a weekly series of data which began in 1990.
“These should be limiting factors for the oil market,” Emori said. “A big improvement of the economic situations of the U.S., Japan and Europe” would be necessary for prices to move higher on a sustained basis, he added.
Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 last week, the highest since mid-November, the Labor Department said, and the third straight week of gains — a trend last seen in January. Financial markets had expected claims to slip to 476,000.
The Philadelphia Federal Reserve Bank said its business activity index dropped to minus 7.7, the lowest since July 2009, as new orders and shipments fell.