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News // Markets & Stocks

Oil prices are still falling

01 July 2010 , 08:51Reuters1603

 

Oil fell for a fourth straight day on Thursday, shedding as much as 1.3 percent, on signs China's economic growth was slowing, while the dollar strengthened as Europe's debt woes kept simmering across financial markets. China's official purchasing managers' index (PMI) fell to a weaker-than-expected 52.1 in June from 53.9 in May, still above the 50 threshold that indicates an expansion, the National Bureau of Statistics said on Thursday, saying the outlook for Chinese exports was grim because of the euro zone debt crisis. Japan's Nikkei dropped more than 2 percent on Thursday, after rating agency Moody's decision on Wednesday to put Spain's credit ratings under revision rekindled aversion to riskier assets, including commodities. "Market confidence remains very fragile and people are concerned about the risks to the international economic recovery," said David Moore, an analyst at the Commonwealth Bank of Australia. "Most of the equity markets seem to be opening lower so that is probably not helping oil." U.S. light, sweet crude fell as much as $1 to $74.63 a barrel in Asia, having slid almost 10 percent in the second quarter, the first quarterly drop since 2008. London Brent crude lost 74 cents on Thursday to $74.27.

 

United States fuel stockpiles posted surprise gains last week, government statistics showed on Wednesday, raising doubts about the speed of demand recovery in the world's top consumer. Traders were also looking to the nation's weekly jobless claims later on Thursday and for June's employment report on Friday for further indications about the direction of the economy. "The data in the next two days is particularly important and has the potential to move oil prices," Moore said. "The macroeconomic picture is key. I wouldn't necessarily think that $75 would be a floor, but over time, we will see prices recover from current levels." Nonfarm payrolls probably fell in June for the first time this year, by 110,000, as many of the 411,000 temporary workers hired in May to complete the census were laid off, a Reuters survey showed. U.S. gasoline stockpiles unexpectedly rose by 537,000 barrels last week, the Energy Information Administration said on Wednesday, trumping forecasts for a drop of roughly the same size. The increase came even as demand climbed 4.5 percent in the past four weeks from a year earlier.

 

Inventories of distillates rose by 2.5 million barrels, more than three times the expected gain, even as consumption jumped 9 percent in the past four weeks from a year earlier. The nation's crude stockpiles fell 2 million barrels in the week to June 25, compared to expectations for a decline of 900,000 barrels. Cushing, Oklahoma, crude supplies shed 795,000 barrels to 36 million barrels. The recent slip from record high storage at the Cushing hub has helped narrow the price spread between the front-month and near-month U.S. crude contracts. The spread narrowed to 53 cents on Wednesday, from $1.21 on Tuesday. Hurricane Alex hit the Mexican coast south of the U.S. border late Wednesday, flooding towns far inland, but the powerful storm stayed clear of oil fields to the relief of crude markets. The Category 2 hurricane hampered efforts to control the massive BP oil spill off the Louisiana coast, and its winds of 105 mph (165 kph) uprooted trees and lashed the port city of Matamoros across from Brownsville, Texas. The U.S. House of Representatives on Wednesday approved a landmark overhaul of financial regulations but the Senate put off action until mid-July, delaying a final victory for President Barack Obama. 

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