WTI headed for first weekly drop in five

West Texas Intermediate fell on Friday and is poised for a first weekly drop in five as U.S. output reached a 22-year high while Chinas latest economic data showed a further slowdown in its manufacturing sector. Brent also fell and is headed for a weekly decline.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $104.84 per barrel 7:30 GMT, down 0.62% on the day. Prices held in range between days high at $105.64 and low of $104.79 a barrel respectively. Light, sweet crude settled 0.25% higher on Thursday but has declined 3.1% so far this week, after gaining 14% during the preceding four.

Meanwhile on the ICE, Brent oil for September delivery stood at $107.27 per barrel at 7:31 GMT, down 0.35% on the day. Prices ranged between days high and low of $107.82 and $107.26 a barrel respectively. The European benchmark gained 0.58% on Thursday, trimming its weekly decline to 1.1% after it fell 0.55% last week.

Oil prices were pressured throughout the week as U.S. output reached a 22-year high while data showed further slowdown of Chinas vast manufacturing sector. The latest EIA oil reserves report on Wednesday showed that despite gasoline and distillate fuel stockpiles confounded analysts’ expectations for an increase, crude reserves matched expectations for a 2.8 million barrels drop and did not exceed them like the previous three weeks. Meanwhile, U.S. oil output rose to 7.56 million barrels per day last week, the highest since December 1990, which fueled concern over ample supply as half of the U.S. driving season has already passed.

However, losses were limited as overall positive U.S. economic data fueled optimism that growth in the worlds biggest economy will pick up in the third quarter and will boost demand prospects. The Commerce Department reported that June’s Durable Goods Orders equaled 4.2%, surpassing expectations for a decrease to 1.4%. May’s reading was revised upwards to 5.2% from 3.6%. However, the U.S. Labor Department said in a separate report that during the week ending July 20, 343 000 people have filed for initial unemployment payments, 3 000 more than analysts predicted and 7 000 more than the preceding week. This eased speculation over an earlier-than-expected deceleration of Feds monetary easing program, which benefited dollar-denominated commodities.

July’s Markit Flash U.S. Manufacturing PMI surpassed analysts’ expectations and surged to 53.2, compared to June’s final estimate of 51.9 and projections for a rise to 52.6.

Meanwhile, June’s New Home Sales also surpassed anticipations for an increase to 0.484 million and surged to 0.497 million. May’s reading was revised downwards to 0.459 million from 0.476 million new homes sold.

Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, said for Bloomberg: “There’s a bit of steam coming out of the market. The data out of the U.S. is mixed but on the whole it’s supportive.” He predicts investors might be encouraged to buy WTI if prices fall to $104 a barrel.

According to a Bloomberg survey, the American benchmark will fall next week amid concern over slowing U.S. economic growth and faltering fuel demand. The survey showed that 24 out of 38 analysts and traders polled, or 63%, wagered on WTI slipping against nine respondents, or 24%, who expected crude to rise. The remaining five anticipate no change.

China data

Meanwhile, global oil demand prospects were hurt as negative data signaled a continuing slowdown of the worlds second biggest economy. Both negative and positive data about the state of the Chinese economy have a strong influence on oil pricing as the Asian country accounted for 11% of global consumption in 2012, according to BP Plc’s Statistical Review of World Energy.

China’s data that was released on Wednesday showed the country’s manufacturing sector decelerated to an 11-month low in July according to the flash HSBC/Markit PMI. The index fell to 47.7, compared to June’s final reading of 48.2 and if confirmed in the final report on August 1, it will be the lowest in 11 months. Readings below 50 indicate contraction in the respective sector.

Meanwhile, a sub-index that measures employment fell for a fourth consecutive month below 50 to 47.3 in July, below June’s 47.7 reading and the the weakest since March 2009.

ANZ analyst Natalie Rampono said for Reuters: “The market is focused on demand rather than supply. The weaker flash PMI numbers out of China on Wednesday is contributing to that weakness and keeping prices under a little bit of pressure.”

Meanwhile, oil drew some support on renewed concern over oil flows running through the Suez-Mediterranean Pipeline and Suez Canal as Egypt braced for clashes between the army and protesting supporters of ousted Islamist President Mohamed Mursi. Protests in Libya over job demand continued to halt oil exports from a key port, while in Iraq outbound shipments are expected to fall by 400 000 to 500 000 barrels in September due to maintenance works.

Market players are looking ahead into todays Final University of Michigan Confidence in order to gauge the recovery pace of the U.S. economy following the recently released mixed data. The indicator is expected to have risen to 84.0, up from Junes 83.9.