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Oil falls on weak economic reports
Source: Agencies |
August 2, 2011, Tuesday
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OIL fell yesterday as early enthusiasm about a deal on America's debt ceiling turned to concern about the global economy following weak readings on US and Chinese manufacturing.
Benchmark West Texas Intermediate crude for September delivery fell 81 cents to settle at US$94.89 per barrel on the New York Mercantile Exchange. It was as high as US$98.60 earlier in the session. Brent crude, used to price many international oil varieties, added 7 cents to settle at US$116.81 per barrel on the ICE Futures exchange in London.
Oil, which usually moves with global markets, climbed early in the day after US lawmakers came up with a last-minute deal to raise the nation's debt ceiling and avoid default. "It looks like we dodged a bullet," said Michael Lynch, president of Strategic Energy & Economic Research. "The question long-term, though, is what's going on with the economy."
The government may continue to pay its bills, but the economy is still sluggish. Traders noted that spending cuts won't spark energy demand in the US.
Independent oil analyst Jim Ritterbusch said soft oil demand will be a rising concern "once the initial hoopla of the debt ceiling deal subsides."
The dollar rose in afternoon trading, which also helped push crude lower. Oil, which is traded in US currency, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.
Oil has been sliding since the middle of last week following reports that gasoline demand continues to be weak, while the economy grew just 1.3 percent from April to June. New reports on manufacturing in the US and China added concerns about petroleum demand overall.
The Institute for Supply Management said manufacturing activity in the US barely grew in July. While it's expanded for 23 straight months, the July reading was the lowest since July 2009 - a month after the recession officially ended.
That followed a report on Sunday that China's manufacturing sector slowed. HSBC's purchasing managers' index for China fell to its lowest level in 16 months. The drop in Chinese manufacturing is particularly significant for economists and oil traders. The country's burgeoning economy is expected to drive global oil demand in coming years. If its economy cools off, many analysts will need to revise their bullish price estimates for oil.
In other Nymex trading for September contracts, heating oil and gasoline futures both fell less than a penny to settle at US$3.0974 and US$3.054 per gallon, respectively. Natural gas rose 4.3 cents to settle at US$4.188 per 1,000 cubic feet.
Benchmark West Texas Intermediate crude for September delivery fell 81 cents to settle at US$94.89 per barrel on the New York Mercantile Exchange. It was as high as US$98.60 earlier in the session. Brent crude, used to price many international oil varieties, added 7 cents to settle at US$116.81 per barrel on the ICE Futures exchange in London.
Oil, which usually moves with global markets, climbed early in the day after US lawmakers came up with a last-minute deal to raise the nation's debt ceiling and avoid default. "It looks like we dodged a bullet," said Michael Lynch, president of Strategic Energy & Economic Research. "The question long-term, though, is what's going on with the economy."
The government may continue to pay its bills, but the economy is still sluggish. Traders noted that spending cuts won't spark energy demand in the US.
Independent oil analyst Jim Ritterbusch said soft oil demand will be a rising concern "once the initial hoopla of the debt ceiling deal subsides."
The dollar rose in afternoon trading, which also helped push crude lower. Oil, which is traded in US currency, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.
Oil has been sliding since the middle of last week following reports that gasoline demand continues to be weak, while the economy grew just 1.3 percent from April to June. New reports on manufacturing in the US and China added concerns about petroleum demand overall.
The Institute for Supply Management said manufacturing activity in the US barely grew in July. While it's expanded for 23 straight months, the July reading was the lowest since July 2009 - a month after the recession officially ended.
That followed a report on Sunday that China's manufacturing sector slowed. HSBC's purchasing managers' index for China fell to its lowest level in 16 months. The drop in Chinese manufacturing is particularly significant for economists and oil traders. The country's burgeoning economy is expected to drive global oil demand in coming years. If its economy cools off, many analysts will need to revise their bullish price estimates for oil.
In other Nymex trading for September contracts, heating oil and gasoline futures both fell less than a penny to settle at US$3.0974 and US$3.054 per gallon, respectively. Natural gas rose 4.3 cents to settle at US$4.188 per 1,000 cubic feet.
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