Oil prices on a steep fall, erase earlier gains

Oil prices erased earlier daily gains and plunged towards the red scale as the greenback advanced further on negative Canada economic data. The dollar index extended gains and reached a days high of 82.47, up 0.57% as Canadas first batch of negative economic news was published at 12:30 GMT.

On the New York Mercantile Exchange, WTI crude for August delivery lost 1.15% on the day, trading at $94.05 per barrel at 14:31 GMT. Light, sweet crude ranged between days high and low at $95.80 and $93.92 respectively. The oil made its biggest intra-day slump on Thursday since more than a month and is headed to a record week decline since April.

Meanwhile, Brent oil for August delivery also lost more than 1% today. The European benchmark traded at $100.80 per barrel, down 1.33% for the day at 14:32 GMT. Brent ranged between daily high and low at $103.09 and $100.54 respectively.

The U.S. dollar found additional support today as a batch of negative economic data from Canada was published at 12:30 GMT, the first in some time. Inflation rose less than expected, followed by retail sales that also mismatched forecasts. On a monthly basis Canadas Consumer Price Index rose by 0.2% for May, but couldnt meet expectations of 0.4%. The annual figure stood at 0.7%, below the 0.9% gain forecast and above 0.4% in May 2012. Annual Core CPI remained at 1.1%, compared to the previous period and met projections. On monthly basis Core CPI rose by 0.2%, compared to 0.1% in April, but again below the 0.3% forecast.

Meanwhile, retail sales for April disappointingly stood at 0.1%, falling behind the 0.2% expectations. Retail Sales ex Autos, a more accurate indicator that excludes the volatile automobile prices, plunged to -0.3%, equaling Marchs revised value and mismatching forecasts of a rise to 0.0%.

Apart from pressure by the strengthened dollar, oil is also pushed down by concern over faltering demand in China, the worlds second biggest consumer. The HSBC PMI flash reading of 48.3, which, if confirmed, will be the lowest since September, mismatched a 49.1 forecast by a Bloomberg News survey and is worse than May’s final value of 49.2. This comes after The World Bank reduced its forecast for the nation’s economic growth to 7.7%, down from 8.4%.

Dominick Chirichella of Energy Management Institute said for Reuters: “A slowing of Chinas manufacturing sector certainly suggests that oil demand growth from the worlds largest oil demand growth engine will also certainly slow. The likelihood of supply continuing to outstrip demand is going to continue forward.”

Demand in the U.S. also seems to be waning as the EIA reported a gain in the U.S. Crude Oil Inventories on Wednesday. Crude reserves rose by 0.313 million barrels as of the week ending June 14, above the average range for this time of the year. Gasoline inventories also rose by 183 000 barrels last week. Distillate fuel inventories dropped by 500 000 barrels, thus remaining below the average range.

Meanwhile, oil prices keep drawing support from the civil war in Syria amid concern the conflict might spread to neighbor oil producing countries. A Reuters source at the last G8 meeting said that an international peace conference on Syria is unlikely to be held before August due to differences between Russia and the West.

John Kerry, U.S. Secretary of State, will meet tomorrow foreign ministers from ten other countries that are backing Syrian rebels in Doha, Qatar. Some of the countries, like France and Saudi Arabia, have stated the opposition is in need of heavier firepower, such as anti-tank and anti-aircraft weapons, whereas the U.S. position stands for supply of small arms only.