Oil Retreats Amid Glum Data, Worsening Demand Worries
World oil prices slid more than one percent on Tuesday, headed for their biggest daily decline in almost two weeks after U.S. data showed Midwest business activity contracted in April and European data showed record unemployment.
A survey showing a rebound in supply from OPEC producers in April further pressuring prices a day after they had rallied up to $104. In mid-April, oil hit a nine-month low below $97, and Brent crude is still down nearly 7 percent for the month, heading for its biggest monthly decline in 11 months.
U.S. light, sweet crude for June delivery on the New York Mercantile Exchange saw its deepest fall in two weeks to settle down more than $1.04, lower at $93.46 a barrel.
Brent crude oil on the InterContinental Exchange settled down $1.44, a barrel lower at $102.37.
Business activity in the U.S. Midwest unexpectedly contracted in April to its lowest level since September 2009, according to the ISM-Chicago Business survey, which followed weaker-than expected U.S. first-quarter growth data released last week.
"This morning the motivating factor is the less-than-stellar Chicago purchasing report. This is industrial, it's the Midwest. Clearly with that report coming out at less than 50, then down went crude," said Dennis Gartman, editor of The Gartman Letter.
Oil traders are looking ahead to see if economic stimulus measures are forthcoming from U.S. and European central banks.
At the U.S. Federal Reserve meeting on Tuesday and Wednesday, policy makers are expected to affirm the central bank's bond-buying plan. The market will also watch this week for a rate cut form the European Central Bank.
Ongoing stimulus could spark investor buying interest, but it "may not revive physical demand for actual gasoline and diesel fuel," noted Tim Evans, energy analyst at Citi Futures Perspective in New York.
In the U.S., the world's top oil consumer, economic growth was lackluster in the first quarter, raising fears the economy could struggle to cope with Washington's austerity drive.
Global Demand Worries
European data on Tuesday showed inflation in the euro zone has fallen to a three-year low and unemployment has hit a record of 12.1 percent.
German retail sales fell for the second month running in March, and Spain's economy shrank for the seventh straight quarter from January to March, preliminary data showed. Spain's recession looks set to last into next year.
"In the last couple of weeks economic data all over the world has capped the upside, and until data shows a strong rebound, there's little chance for a bounce back," said Andy Sommer, analyst at EGL in Dietikon, Switzerland.
There was bearish news on the supply side of the equation too, with supply from the Organization of the Petroleum Exporting Countries set to average 30.46 million barrels per day (bpd), up from 30.18 million bpd in March, according to a Reuters survey.