Oil Trades Near 6-Week Low as U.S. Jobless Claims Prompt Recovery Concerns

Crude oil traded little changed near a six-week low after falling as increased U.S. jobless claims and a contraction in manufacturing added to concern the economic rebound in the world’s biggest oil-consuming country is slowing.

Oil, which is down 1.3 percent for the week, fell yesterday after the Labor Department said initial jobless claims rose to the highest level since November. The Federal Reserve Bank of Philadelphia’s general economic index dropped to the lowest reading since July 2009. Total U.S. petroleum inventories are the highest in at least 20 years, Energy Department figures show.

“Sentiment and the fundamental news at the moment is still quite bearish, and I think that will weigh on the market and probably see prices lower,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “I think $70 to $68 is on the cards.”

Crude oil for September delivery was at $74.37 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 10:06 a.m. Sydney time. Yesterday, the contract fell 99 cents, or 1.3 percent, to $74.43, the lowest settlement price since July 7. Futures are up 2.6 percent from a year ago.

Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, U.S. Labor Department figures showed. Claims exceeded all estimates of economists surveyed and compared with the median forecast of 478,000.

Brent crude oil for October settlement was little changed at $75.21 a barrel on the ICE Futures Europe Exchange in London at 10:05 a.m. Sydney time. It slipped $1.17, or 1.5 percent, to end the session at $75.30 a barrel yesterday.

Equities Decline

“U.S. stocks tumbled on the back of weaker-than-expected economic data, with unemployment claims unexpectedly jumping to the highest level in 9 months and the Philadelphia Fed survey showed manufacturing had shrunk,” Ben Potter, a market strategist at IG Markets in Melbourne, said in an e-mailed note.

The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 this month. Negative readings signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Economists forecast the measure would rise to 7, according to the median of 58 projections in a Bloomberg News survey.

The Standard & Poor’s 500 Index declined 1.7 percent in New York, and the Dow Jones Industrial Average dropped 1.4 percent. The dollar climbed yesterday, reducing the appeal of commodities as an investment.

A U.S. Energy Department report on Aug. 18 showed that total petroleum stockpiles climbed 5.34 million barrels to 1.13 billion in the week ended Aug. 13, the highest level since at least 1990. Supplies of crude oil fell 818,000 barrels to 354.2 million barrels, according to the Energy Department report. Gasoline stockpiles dropped 39,000 barrels to 223.3 million.