Oil price falls after US growth disappoints
November 24, 2009
By Joshua Schneyer
New York - Oil prices fell two percent on Tuesday after data showed the US economy grew at a slower-than-expected pace last quarter and ahead of weekly US inventory data expected to show crude stocks rose.
A slower recovery from the worst US recession in seven decades may hurt demand for crude. The world's largest economy grew at an annual rate of 2.8 percent last quarter, the Commerce Department said, revising downward its earlier estimate of 3.5 percent growth.
Consumer spending, which typically accounts for more than two-thirds of US economic activity, also lagged behind estimates last month, the Commerce Department said.
"We don't like the GDP figures, and we're worried about a potential build in crude stocks," said Tim Evans, oil analyst with Citi Futures Perspective in New York. "Consumer spending is weaker than expected -- and that's where we hoped to see a pickup in petroleum demand."
US crude for January delivery fell $1.54, or 2 percent, to settle at $76.02 a barrel. In London, Brent crude settled down $1.00 at $76.46.
Data may show that US crude oil and fuel stocks rose last week, as Gulf of Mexico production recovered after a tropical storm shut platforms in the previous week.
Crude stocks likely rose 1.2 million barrels in the week to November 20, while stocks of gasoline likely rose slightly and distillates fell slightly, according to the average analyst estimate in a Reuters poll.
Inventory data from the private industry group American Petroleum Institute was due at 4:30 p.m. EST Tuesday, followed by official data from the Department of Energy early Wednesday.
Oil prices have risen from below $33 a barrel last December, although they are still around 48 percent lower than a record above $147 reached in July 2008.
Prices have risen amid rallying stock markets and a weaker US dollar, which makes crude cheaper for holders of foreign currency. The S&P 500 index rose into positive territory in late trade after falling earlier Tuesday. The dollar index was slightly stronger.
Global oil demand growth will outpace new oil supplies in 2010, eroding stockpiles of crude that have risen during the economic crisis, according to a Reuters survey on Tuesday.
The poll of 10 top oil-tracking analysts and organisations forecast oil demand to rise by 1.3 million barrels per day next year.
US consumer confidence rose in November, after an unexpected drop in October, industry group The Conference Board said on Tuesday.
But analysts remain worried about the pace of fuel demand recovery.
US retail gasoline demand fell 1.6 percent last week versus the previous week, and it was down 1.4 percent from the same week of 2008, according to a report from MasterCard SpendingPulse on Tuesday.
Opec, the exporters' group that pumps one in three barrels of oil worldwide, must be careful not to collapse oil prices by oversupplying the market, Nigerian Oil Minister Rilwanu Lukman told reporters in Washington on Tuesday.
Members of the Organisation of the Petroleum Exporting Countries next meet to discuss output policy in Angola on December 22. The group has not changed its production targets this year. - Reuters
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