Thursday, August 12, 2010

Crude Falls Below $77 After U.S. Supplies Increase, Economic Outlook Dims

Crude oil declined for a third day after U.S. jobless claims increased, bolstering concern that economic growth will slow and fuel demand will drop. Oil decreased as much as 2.5 percent as initial jobless claims rose by 2,000 to 484,000 last week, the highest level since February. Yesterday, a government report showed that U.S. gasoline supplies climbed for a seventh week and stockpiles of distillate fuel, a category that includes heating oil and diesel, advanced to the highest level since January 1983.

“The weekly jobless numbers were disastrous and sent the market lower,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The oil market is facing the reality, which is that supplies exceed demand. The only thing that was supporting prices was a false sense of economic security.” Crude oil for September delivery dropped $1.46, or 1.9 percent, to $76.56 a barrel at 10:03 a.m. on the New York Mercantile Exchange. Futures touched $76.05, the lowest level since July 28.

Brent crude oil for September settlement fell $1.52, or 2 percent, to $76.12 a barrel on the London based ICE Futures Europe Exchange. Economists forecast claims would fall to 465,000, according to the median of 42 projections in a Bloomberg News survey. The government revised the prior week’s claims figure up to 482,000 from a previously reported 479,000. The Federal Reserve on Aug. 10 held its benchmark interest rate at a record low and announced it will reinvest principal payments on mortgage holdings into long-term Treasury securities, an effort to bolster economic growth.....Read the entire article.

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