GO
Loading...

Oil Relapses; Brent Dips Under $103 on Growth Fears

Brent crude oil edged lower on Friday, following a two-day, $3 rally, as weak economic data from the United States sounded a note of caution on growth prospects in the world's largest oil consumer.

Prices cut losses in the afternoon following a midday commodities selloff that traders said may have been prompted by fund liquidations as European markets closed for the weekend. Other commodities such as metals also sold off, and gold lost 0.3 percent.

"The markets tend to overreact. The oil market got knocked off its knees and grabbed some legs," said Dan Flynn, an analyst and trader at Price Futures Group in Chicago, Illinois.

Even though Brent looks on track for its biggest one-week gain since November 2012, it is still more than 6 percent below where it started April after a string of disappointing reports in recent weeks from the U.S., China and Germany stoked fears of global economic slowdown.

Traders said low trading volumes indicated a lack of conviction in this week's rally. Volumes for U.S. crude were 35 percent lower than the 30-day moving average.

On Friday, Commerce Department data showed that U.S. gross domestic product expanded at a 2.5 percent annual rate in the first quarter. This advance read on how the economy kicked off 2013 was slightly worse than the 3.0 percent rate expected, prompting worries about a deceleration in the second quarter and sending U.S. equity markets down.


Brent crude futures touched a low of $102.56 before clawing back above $103, still 40 cents lower on the day. U.S. light, sweet crude shed about 70 cents to trade just under $93.

"The market rebounded pretty strongly in the past week. We bounced from $85 close to $94 and it looks as if what you're seeing today is a little bit of profit-taking," said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.


Brent's premium to U.S. crude futures edged lower after settling at below $10 on Thursday for the first time since January 2012.

"The market has gone through a period of relatively robust North Sea production, thus weakening the Brent side of the spread, while market participants are less concerned with the overhang of crude oil in the U.S. Midwest as the ability to move oil out of the region continues to increase," Dominick Chirichella of Energy Management Institute said.

Oil has also been supported by a tightening of global inventories over the past two months, according to a report from the U.S. Energy Information Administration, as well as by ongoing tensions in the Middle East.

Members of the U.S. Congress are calling for action on Syria after a report showed the likely use of chemical weapons by the Syrian government.