Oil falls below $124 a barrel after weak US economic data stirs demand concerns. Oil prices dropped more than $3 a barrel Thursday, retreating from the previous day's surge, as disappointing data on the U.S. economy signaled further cutbacks in energy demand for the world's thirstiest oil consumer.
In another sign Americans are driving less, U.S. filling stations hungry for business continued to ratchet down retail gas prices, with a gallon of regular falling on average 1.7 cents to $3.909,
Light, sweet crude for September delivery fell $3.47 to $123.30 a barrel in afternoon trading on the New York Mercantile Exchange, after posting gains earlier in the day.
People looked at yesterday's frenzied rally and realized the fundamentals weren't there to support it,
Prices surged $4.58 on Wednesday to settle at $126.77 after the government reported a surprise drop in U.S. gasoline supplies. The rally halted a dramatic two-week slide in which crude shaved 17 percent off its all-time high above $147, reached July 11.
U.S. gross domestic product rose just 1.9 percent in the second quarter despite government tax rebates aimed at jolting the economy. Economists had expected growth of 2.4 percent. The weak 1 percent GDP figure of the first three months of 2008 also was modified lower to 0.9 percent.
the number of people seeking jobless benefits rose to the highest level in five years. Economists warned the weekly figures can be volatile and some dismissed them as an aberration,
The poor readings rekindled fears of a recession, prompting energy traders to dump oil contracts on expectations that more belt-tightening lay ahead for Americans who are already skipping vacations, giving up gas-gazzling SUVs and cutting back on driving to cope with almost $4-a-gallon gasoline.
When you order grounding of planes and people are making significant driving changes in the U.S. because the price of food and gasoline have doubled, that's very bearish (for oil prices) moving forward.
Prices were also pressured as traders cashed in profits from Wednesday's rally. Some analysts attributed the spike to low trading volume in oil markets, which can increase volatility.
Speculative traders, particular large investment funds, have been liquidating oil positions in recent months and are now shorting crude contracts, or betting that prices will fall, for the first time in 17 months.
Speculative traders, particular large investment funds, have been liquidating oil positions in recent months and are now shorting crude contracts, or betting that prices will fall, for the first time in 17 months.
Crude has fallen over the last three weeks from a record high of $147.27 on July 11, in part, on expectations that the spike in prices over the last year has begun to dampen U.S. demand for gasoline.
But the Energy Information Administration said Wednesday in its weekly inventory report that U.S. gasoline supplies fell 3.5 million barrels last week. Analysts surveyed by energy research firm Platts expected gasoline supplies to increase by 400,000 barrels.
Gasoline stocks had risen in three previous three weeks.
But the Energy Information Administration said Wednesday in its weekly inventory report that U.S. gasoline supplies fell 3.5 million barrels last week. Analysts surveyed by energy research firm Platts expected gasoline supplies to increase by 400,000 barrels.
Gasoline stocks had risen in three previous three weeks.
It should be pointed out that gasoline stocks are healthy and remain 3 percent above the 5-year average,
the EIA figures showed while gasoline demand reached a yearly high of 9.47 million barrels a day, that still was 2 percent lower than a year ago,
In other Nymex trading, heating oil futures fell 7.18 cents to $3.4485 a gallon while gasoline prices lost 8.51 cents to $3.05 a gallon. Trading of gasoline and heating oil was more volatile than normal because both contracts were set to expire at the end of the day.
Also Thursday, the Energy Department's Energy Information Administration said in its weekly report that natural gas in storage in the U.S. rose last week but is 0.5 percent below the five-year average for this time of year.
Natural gas futures shed 16.8 cents to $9.09 per 1,000 cubic feet.
In London, September Brent crude fell $2.54 to $124.56 a barrel on the ICE Futures exchange.
Also Thursday, the Energy Department's Energy Information Administration said in its weekly report that natural gas in storage in the U.S. rose last week but is 0.5 percent below the five-year average for this time of year.
Natural gas futures shed 16.8 cents to $9.09 per 1,000 cubic feet.
In London, September Brent crude fell $2.54 to $124.56 a barrel on the ICE Futures exchange.
