WTI crude near three-week high on U.S. data

Oil prices were slightly lower on Friday, but still remained near a three-week high level, following positive U.S. economic news, published on Friday. Data showed that the worlds biggest economy continues to move forward, supporting future oil demand and giving ground for speculations about earlier-than-expected Quantitative Easing scale back.

Retail Sales for May exceeded expectations of a 0.4% increase and stood at 0.6%, compared to a 0.1% gain in the preceding month. Rising Retail Sales are a sign of economy growth as consumer’s confidence rises. Core retail sales, retail sales ex autos, matched projections of a 0.3% gain, which surpassed the preceding month’s figure of a 0.1% increase. Initial Jobless Claims also outperformed expectations, by 11 000, and fell to 334 000 during the week ending June 8, compared to 346 000 in the preceding week. The Import Price Index failed to surpass expectations, slipping 0.6% on a monthly basis and 1.9% on annual, compared to projections of 0.0% and a 1.4% decrease respectively. Positive news, however, outweighed the Import Price Index, which supported oil prices.

The U.S. is the worlds biggest oil consumer that accounts for around 21% of global oil consumption. This means that any signs of expansion or contraction of the U.S. economy results in wide fluctuations in oil prices.

On the New York Mercantile Exchange, WTI crude for July delivery traded 0.16% lower on the day at $96.54 per barrel at 6:52 GMT. Prices ranged between daily high and low at $96.78 and $96.43 a barrel respectively.

Brent oil futures for August delivery was down 0.28% on the day to trade at $104.62 a barrel at 6:51 GMT. The European benchmark ranged between days high at $104.98 and low of $104.58 per barrel.

Ric Spooner, a chief market analyst at CMC Markets in Sydney said for Bloomberg: “The U.S. consumer is making a reasonable contribution to growth. Given the supply outlook, inventory levels and rising production in the U.S., the market will probably need some sort of news catalyst to get it through that level.” He also predicted traders may sell WTI for around $97 pr barrel.

Still, every good U.S. indicator figure carries speculations about Feds bond purchasing program with it. U.S. central banks monetary stimulus has been under the lights for some time now and has been one of the major factors for dollar-priced commodities pricing, as they are inversely linked to the greenback.

Oil prices are also pressured by reduced global demand outlook and rising supplies in the U.S. for the last week. The EIA said in its weekly report on Wednesday that Crude Oil Inventories in the U.S. gained 2.5 million barrels to 393.8 million, which is above the average range for this time of the year. Gasoline stockpiles rose by 2.7 million barrels last week and were also above the average range. Distillate fuel inventories marked a decrease of 1.2 million barrels during the week ending June 7 and remained lower than the average range.

Meanwhile, China published negative economic data on Saturday, which spurred further concern about the second biggest oil consumers demand. The IEA said: “While Europe’s economic woes are taking a toll on demand, there are mounting signs that China’s oil use, like its economy, may have shifted to a lower gear.”

According to the World Banks report this week, the global economy will expand 2.2% this year, less than its previous projections of 2.4% in January. Gross Domestic Product in the European Union will contract by 0.6%, while the U.S. and Japan will show improvement, the World Bank said.

Also, on Tuesday OPEC and the EIA cut their global demands forecasts. The group trimmed its expectations for 2013 world demand growth by 10 000 barrels per day to 780 000. Meanwhile, OPEC pumped out a seven-month high of 30.9 million barrels per day during May, mainly due to increased output from Saudi Arabia. The IEA said in its monthly report yesterday that OPEC will have to pump out 29.8 million barrels per day in order to meet demand in the second half of the year, which is 200 000 barrels lower compared to IEA’s previous projection. This means OPEC will have to cut its output by 1.1 million barrels.

Oil prices have been drawing support from the dollar, which has extended losses during the whole week against its major counterparts. The greenback remained largely unchanged even after yesterdays positive U.S. economic news. Although oil demand globally is lower and projections are being cut with each report, the weakening greenback has been support oil prices as it makes dollar-priced commodities cheaper for foreign currency holders and also boosts their appeal as alternative investments.