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News // Markets & Stocks

Oil prices rebounded despite data showing slower global economic growth

02 July 2010 , 08:38Reuters1700



Oil prices rebounded on Friday from three-week lows, but were still far from reversing the biggest one-day drop in almost a month a day earlier, after a spate of weak manufacturing data reflected slower global economic growth. Investors will seek further direction from Friday's U.S. unemployment report for June, with non-farm payrolls expected to have declined 110,000 as many of the temporary workers hired in May to complete the U.S. census were laid off. Manufacturing growth cooled around the world in June, reports from China, Europe and the U.S. showed on Thursday, adding to evidence that the global economic recovery is losing steam. U.S. light, sweet crude rose 15 cents to $73.11 a barrel in Asia, after touching $72.05 on Thursday, the lowest intraday price since June. Front-month WTI has declined every day this week before Friday, with the biggest drop on Thursday, when it slumped 3.5 percent. "The market still needs to see strong signs of recovery to move higher," said Ken Hasegawa, a commodity derivatives manager at brokerage Newedge in Japan.


Japan's Nikkei average edged up 0.4 percent on Friday after five straight days of falls as charts showed the benchmark deeply oversold, while the euro held near five-week highs against the dollar. Oil prices on Friday were tracking stock markets higher, rising for the first time this week. But they were still poised for their biggest weekly drop in percentage terms since early May, as Hurricane Alex dissipated over central Mexico, having spared most oil facilities in the Gulf of Mexico. Producers on Thursday were already restarting some of the 421,350 barrels per day (bpd) of oil output, about a quarter of the U.S. Gulf of Mexico total, that were shut as a precaution. On Monday prices rose above $79 to the highest level since May 6 as Alex regained strength in the gulf, forcing the shutdown of two Mexican loading terminals. "This market tried to touch the upper end of the $70-$80 trading range but it failed. Now it is time to go to the lower limit," said Hasegawa.


New claims for U.S. jobless benefits unexpectedly rose last week, heightening concern that the economic recovery of the world's largest oil consumer was stalling. "If the jobs number is bad, prices will extend losses toward $70," Hasegawa said about Friday's monthly unemployment report. The ISM report also disappointed markets on Thursday, as did data showing pending sales of previously owned U.S. homes plunged a record 30 percent in May to an all-time low. Energy data provider Genscape said on Thursday that Cushing, Oklahoma crude stocks fell 285,000 in the week to Tuesday, reducing a glut that has depressed front-month U.S. crude prices relative to contracts for later delivery. 


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