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Oil prices lower after disappointing economic data
NEW YORK — A slew of disappointing economic news spooked investors Thursday and pushed down the price of oil.
Shoppers in the U.S. cut back on spending last month, leaving many retailers with tepid sales and concerns about consumer demand during the coming back-to-school season. Consumers drive about 70 percent of U.S. economic growth. And the Institute for Supply Management reported that U.S. service companies appear to be struggling, as growth declined last month to the slowest pace in nearly two and a half years. Service companies, which include retail, construction, financial services, health care and hotels, employ about 90 percent of the nation's workers.
On the brighter side, weekly jobless claims fell to a six-week low, offering some hope on the jobs front.
Meanwhile, Europe and China lowered interest rates in an effort to spark consumer borrowing and spending. Interest rate cuts — and the expectation that they'll increase economic growth and energy demand — have boosted oil prices in the past. This time, analysts said, investors are focusing most on what those moves say about the economy.
"You have to ask why they are stimulating the economy in the first place," independent analyst and trader Stephen Schork said. "We're still in this economic malaise."
The U.S., China and Europe have instituted a number of government stimulus programs since the Great Recession, and analysts say investors are increasingly frustrated that the global economy continues to limp along.
"We're still in uncertain economic waters," said Gene McGillian, a broker and oil analyst at Tradition Energy. "We need to see consistently better economic news, and there's a general fear that we're not going to see that anytime soon."
Benchmark U.S. crude lost 44 cents to end the day at $87.22 per barrel in New York — a slight drop following a jump of nearly $10 a barrel in less than a week.
The U.S. Energy Information Administration reported that the nation's supplies of oil fell by 4.3 million barrels last week. Analysts expected a decline of 2 million barrels, according to Platts, the energy-information arm of McGraw-Hill Cos.
A drop in oil supplies usually pushes prices higher. But analysts pointed out that the U.S. has more oil on hand than in the past 22 years, and crude stocks are almost 12 percent above the five-year average. The country also used less oil and gasoline last week, compared with a year ago.
Overseas, Norway's Statoil said that striking oil workers will force it to shut down production in the North Sea by 1.2 million barrels per day. That's nearly as much oil lost on world markets last year during the Libyan uprising.
Brent crude, which comes from the North Sea, rose by 93 cents Thursday to end at $100.70 per barrel in London. Brent crude helps set the price for oil imported into the U.S. that is used to make gasoline.
At the pump, retail gasoline prices were flat at a national average of $3.338 per gallon, according to AAA, Wright Express and Oil Price Information Service. Gasoline prices have held steady this week after dropping nearly 60 cents since the first week in April.
In other futures trading, heating oil added nearly a penny to end at $2.768 per gallon, and wholesale gasoline rose 4.19 cents to finish at $2.7648 per gallon. Natural gas rose by 4.6 cents to finish at $2.9450 per 1,000 cubic feet.
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