WTI extends losses on U.S. economy outlook

WTI fell for a third day prior to a government report on Wednesday that may show the U.S. economys growth has stalled in the second quarter, hurting demand prospects in the worlds top consumer. Market players remained cautions ahead of the outcome of FOMCs two day meeting that ends tomorrow and Chinas official PMI on Thursday. Key U.S. data also remained in focus.

On the New York Mercantile Exchange, WTI crude for September delivery hit a new days low at $104.08 a barrel at 7:03 GMT, down 0.23% on the day. Days high stood at $104.58 a barrel during early Asian trading. Light, sweet crude fell 0.34% on Monday and is so far posting a 0.4% weekly decline after plunging 3.33% the preceding one.

Meanwhile on the ICE Futures Exchange, Brent oil for September delivery fell to $107.24 a barrel at 7:04 GMT, marking a 0.20% loss. Prices held in range between high and low of $107.60 and $107.21 a barrel respectively. The European benchmark settled 0.27% higher on Monday amid disruptions in North Sea pumping and has so far advanced over 0.15% on the week after plunging 1.26% the previous one.

Upcoming data in focus

Oil fell on Tuesday as market players remained cautious ahead of a government report tomorrow that may show the U.S. economy grew at a much slower pace in the second quarter compared to the first. According to analysts expectations, Q2 GDP growth may have fallen to as much as 1.0% for the period April-June, down from 1.8% in the preceding quarter. Meanwhile, investors also avoided taking big positions ahead of other key U.S. data this week and the outcome of FOMCs two-day meeting that ends on Wednesday.

Consumer Confidence and S&P/Case-Shiller Composite-20 Home Price Index will be released on Tuesday. On Wednesday, 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.

Chinas official manufacturing PMI will be released this week. The country’s HSBC/Markit PMI fell to 47.7, compared to June’s final reading of 48.2, the lowest in 11 months. Final reading will be released on Thursday, August 1. Readings below 50 indicate contraction in the respective sector.

Ric Spooner, chief market analyst at CMC Markets, said for Reuters: “Oil prices are pretty stable but theres quite a lot potentially happening this week and I think traders are prepared to wait for the data to start to come. The market is kind of level but the risk will be to the downside.”

Oil was also pressured recently as Saudi Prince Alwaleed bin Talal told Oil Minister Ali Al-Naimi in an open letter that Saudi Arabia won’t be able to increase daily output to 15 million barrels as planned as rising North American shale oil production is expected to increase self-sustainability and reduce U.S. crude imports. He also said there is a “clear and increasing decline” for OPEC oil and that the kingdom is now pumping below capacity as consumers reduce imports.

Support

Meanwhile, oil losses remained limited as analysts expect a fifth consecutive drop in U.S. crude oil inventories to be reported this week prior to APIs report on Tuesday and EIAs statistics on Wednesday. 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.

The industry-funded American Petroleum Institute will release its separate report today but it is considered as less reliable as it is based on voluntary information from operators of refineries, bulk terminals and pipelines.

Meanwhile, oil also drew support as the North Seas Forties pipeline continued to operate with around 40 000 barrels per day reduced capacity due to maintenance works. Escalating tension in Libya, which came after a political activist was killed last week, caused the death of a soldier in Benghazi.

Political tension in Egypt continues to threaten oil shipments and flows through the Suez Canal and Suez-Mediterranean pipeline as Egypt’s Muslim Brotherhood, which supports ousted President Mohamed Mursi, defied the new government’s threats to cease protests and urged loyalists to march on security installations. The army on the other hand dropped leaflets on Islamist protesters telling them to keep away from the installations in order to maintain their safety.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “The U.S. economy looks as though it’s still softening. If the GDP number does come in around consensus, the oil price will probably continue to weaken. It’s probably only the events that we’re seeing still rippling around the Middle East that are perhaps keeping WTI in the three figures.”