Oil traded near the lowest in more than five weeks as concern the economic recovery is faltering in the U.S., the biggest crude consumer, countered speculation the Federal Reserve may start another stimulus program.
New York futures were little changed after reports yesterday showed U.S. service industries expanded in July at the slowest pace in 17 months and crude stockpiles climbed for a second week. Three former senior officials at the Fed said the central bank should consider a new round of securities purchases to bolster economic growth, the Wall Street Journal reported.
“Market participants seem to be concerned about growth prospects in the U.S.,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicts crude will average $98 a barrel in the third quarter. Reports of stimulus “may give a short-term reprieve to prices and forecast demand but if these weak numbers keep coming out it’s going to swamp any positive sentiment around further quantitative easing,” he said.
Crude for September delivery was at $91.84 a barrel in electronic trading on the New York Mercantile Exchange, down 9 cents, at 3:22 p.m. Singapore time. The contract earlier rose as much as 66 cents and fell 42 cents. Yesterday, it dropped $1.86 to $91.93, the lowest since June 27. Futures have gained 11 percent the past year.
Brent oil for September settlement on the London-based ICE Futures Europe exchange traded at $113.32 a barrel, down 4 cents. The European benchmark contract was at a $21.53 premium to U.S. futures, after reaching a record $22.67 on Aug. 2.
U.S. crude inventories rose 950,000 barrels in the week ended July 29 to 354.9 million, an Energy Department report showed yesterday.
Gasoline stockpiles climbed 1.7 million barrels to 215.2 million, the highest since April 1. Supplies were forecast to increase 250,000 barrels, based on the median estimate from analysts surveyed by Bloomberg News. Distillate fuel inventories, a category that includes heating oil and diesel, increased 409,000 barrels to 152.3 million.
Crude in New York may rebound after prices reached technical support along the lower Bollinger Band yesterday, according to data compiled by Bloomberg. This indicator is at $90.62 a barrel today and the next level, the middle Bollinger Band, is at $95.84. Prices tend to change direction when they fail to breach chart support or resistance.
The Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the economy, dropped to 52.7 from 53.3 in June. A median increase to 53.5 was forecast by economists polled by Bloomberg News. Readings above 50 signal expansion.
A Labor Department report today may show initial U.S. jobless claims climbed last week. A report tomorrow may show payrolls increased by 85,000 workers in July after an 18,000 increase in June that was the smallest this year, according to the median forecast of 86 economists surveyed by Bloomberg News.
Tropical Storm Emily moved west, pouring rain over the Caribbean island of Hispaniola, resuming a course that may threaten the U.S. East Coast this weekend, the U.S. National Hurricane Center said.
Emily packed maximum sustained winds of 50 miles (80 kilometers) per hour, according to an advisory posted by the center before 11 p.m. New York time. The center of the storm may cross Haiti and the Dominican Republic today, bringing heavy rain and causing deadly flooding.