Oil at three-week low ahead of U.S. data

West Texas Intermediate fell to its lowest level in three weeks on speculation for faltering demand in the worlds top consumer. The Commerce Department will release a report at 12:30 GMT tomorrow that is likely to show the U.S. economy expanded with a much slower pace in the second quarter, compared to the preceding three months.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $103.67 a barrel at 14:14 GMT, down 0.84% on the day. Prices ranged between days high at $104.58 and low of $103.39 a barrel, the lowest since July 9. Light, sweet crude fell 0.34% on Monday and is so far posting a 0.9% weekly decline after plunging 3.33% the preceding one.

Meanwhile on the ICE, Brent oil for September delivery stood at $107.23 a barrel at 14:15 GMT, marking a 0.21% daily loss. Futures held in range between $107.60 and $106.95 a barrel respectively. The European benchmark settled 0.27% higher on Monday amid disruptions in North Sea pumping and has so far advanced 0.1% on the week after plunging 1.26% the previous one.

Oil prices continued to sink on Tuesday as negative sentiment over the U.S. economys recovery weighed on prices. Data showed consumer confidence in the worlds biggest oil consumer fell more than expected in July and stood at 80.3. The indicator was projected to plunge to 81.0 from Junes upwards revised reading of 82.1. This fueled further concern over oils demand prospects as faltering confidence means people are less likely to spend more money, which generally leads to decline in retail sales and up the chain towards slowing economic activity.

Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said for Bloomberg: “People are worried about tomorrow’s GDP number and oil demand. We’ve had a pretty big rally. There is concern about whether these price levels are sustainable.”

Investors remain cautious ahead of other key U.S. data this week and the outcome of FOMC’s two-day meeting that ends on Wednesday. Also on that day we’ll receive preliminary unemployment data prior to Friday’s Unemployment Rate. The ADP Employment Change is expected to remain flat at 188 000. Also on Wednesday, Personal Consumption Expenditures, Employment Cost Index and Chicago PMI will be released and the FOMC will announce its interest rate decision. On Thursday, Initial Jobless Claims are expected to have risen by 1 000 in the week ending July 27 and the ISM Manufacturing index should show improvement. On Friday, one of Fed’s main requirements to trim its monetary stimulus, the Unemployment Rate, is expected to have fallen to 7.5% in July, down from 7.6%. Also on Friday are due Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders.

Supportive for oil remain geo-political factors from the Middle East and the upcoming API and EIA crude oil inventories reports, which are expected to show a fifth consecutive decline in stockpiles. According to a Bloomberg survey, U.S. crude reserves dropped by 2.2 million barrels last week to 362 million, the lowest since January. Gasoline stockpiles probably fell by 1.1 million barrels, while distillate fuel inventories are expected to have gained 500 000 barrels.