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Oil rally stalls in face of better economic data
OIL prices dipped yesterday, yet are now well above levels just one month ago as a string of economic reports provides a brighter outlook for the global economy.
Benchmark crude for September delivery fell 16 cents to settle at US$71.42 a barrel on the New York Mercantile Exchange. Crude prices had risen for four straight days before yesterday. A barrel of crude cost around US$64 a month ago.
The housing market continued to show signs of life with pending U.S. home sales rising in June for the fifth straight month, according to the National Association of Realtors. The last time there were five straight monthly gains was July 2003.
At the same time, the Commerce Department said consumers boosted their spending 0.4 percent in June, slightly ahead of analysts' estimates, even though personal income fell 1.3 percent, the steepest drop in more than four years.
In what may have been the depth of the recession, energy prices plunged as businesses and consumers slashed spending. That trend began to ease as early as February partly because a barrel of crude could be had for around US$40, a third of the price last summer, and partly on optimism about an economic rebound.
The weak dollar is bringing even more money into the market. Because crude is bought and sold in dollars, it effectively becomes cheaper when the U.S. currency falls.
That influx of optimism, and money, has helped push gasoline prices higher for 14 straight days, a month after prices peaked for the summer.
Energy experts believe that the fundamentals of supply and demand do not support crude prices near US$70 per barrel. There is some trepidation about rapidly climbing prices, which some fear may hinder any economic recovery.
The chief economist of the International Energy Agency told the Financial Times that prices higher than US$70 could extend the recession.
"If we go one step further, if we see prices go much higher than that, we may see it slow down and strangle economic recovery," he said of oil prices on Friday, when the European benchmark was around US$70.
There is still plenty of downward pressure on energy prices, and not only because the U.S. driving season is wrapping up.
Colorado State University researcher William Gray slightly downgraded his forecast for the 2009 Atlantic hurricane season to 10 named storms, including four hurricanes, two of them major. In June, his team forecast 11 named storms, including five hurricanes, two of them major.
Prices spiked last summer when hurricanes Gustav and Ike slammed into the nation's energy complex in the Gulf of Mexico.
The hurricane season runs until Nov. 30.
Also, the U.S. government will release its weekly report Wednesday on crude supplies. Analysts are expecting that the amount of crude placed in storage, with refiners pulling back on production, will increase for the second straight week.
In other Nymex trading, gasoline for September delivery lost 1.26 cents to settle at US$2.0567 a gallon and heating oil rose 3.01 cents to settle at US$1.9014 a gallon. Natural gas for September delivery fell 3 cents to settle at US$4.001 per 1,000 cubic feet.
In London, Brent prices added 73 cents to settle at US$74.28 a barrel on the ICE Futures exchange.
Benchmark crude for September delivery fell 16 cents to settle at US$71.42 a barrel on the New York Mercantile Exchange. Crude prices had risen for four straight days before yesterday. A barrel of crude cost around US$64 a month ago.
The housing market continued to show signs of life with pending U.S. home sales rising in June for the fifth straight month, according to the National Association of Realtors. The last time there were five straight monthly gains was July 2003.
At the same time, the Commerce Department said consumers boosted their spending 0.4 percent in June, slightly ahead of analysts' estimates, even though personal income fell 1.3 percent, the steepest drop in more than four years.
In what may have been the depth of the recession, energy prices plunged as businesses and consumers slashed spending. That trend began to ease as early as February partly because a barrel of crude could be had for around US$40, a third of the price last summer, and partly on optimism about an economic rebound.
The weak dollar is bringing even more money into the market. Because crude is bought and sold in dollars, it effectively becomes cheaper when the U.S. currency falls.
That influx of optimism, and money, has helped push gasoline prices higher for 14 straight days, a month after prices peaked for the summer.
Energy experts believe that the fundamentals of supply and demand do not support crude prices near US$70 per barrel. There is some trepidation about rapidly climbing prices, which some fear may hinder any economic recovery.
The chief economist of the International Energy Agency told the Financial Times that prices higher than US$70 could extend the recession.
"If we go one step further, if we see prices go much higher than that, we may see it slow down and strangle economic recovery," he said of oil prices on Friday, when the European benchmark was around US$70.
There is still plenty of downward pressure on energy prices, and not only because the U.S. driving season is wrapping up.
Colorado State University researcher William Gray slightly downgraded his forecast for the 2009 Atlantic hurricane season to 10 named storms, including four hurricanes, two of them major. In June, his team forecast 11 named storms, including five hurricanes, two of them major.
Prices spiked last summer when hurricanes Gustav and Ike slammed into the nation's energy complex in the Gulf of Mexico.
The hurricane season runs until Nov. 30.
Also, the U.S. government will release its weekly report Wednesday on crude supplies. Analysts are expecting that the amount of crude placed in storage, with refiners pulling back on production, will increase for the second straight week.
In other Nymex trading, gasoline for September delivery lost 1.26 cents to settle at US$2.0567 a gallon and heating oil rose 3.01 cents to settle at US$1.9014 a gallon. Natural gas for September delivery fell 3 cents to settle at US$4.001 per 1,000 cubic feet.
In London, Brent prices added 73 cents to settle at US$74.28 a barrel on the ICE Futures exchange.
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