U.S. crude oil futures plunged 4 percent to below $80 a barrel Thursday, settling at its lowest since early October 2011. Oil slipped on demand concerns after some weak economic data from China and U.S., coupled with a strengthening dollar. Prices were also impacted by the more-than-expected U.S. crude oil stockpile increase last week. Investor sentiments were at a low after the Federal Reserve failed to provide any monetary stimulus measures, widely expected this time.
In economic news from the U.S., the National Association of Realtors' report showed a slightly bigger than expected drop in U.S. existing home sales in May, while the Philadelphia-area manufacturing firms indicated weaker business conditions in June, a Federal Reserve Bank of Philadelphia report showed Thursday.
Meanwhile, a survey showed China's factory output contracted for an eighth straight month in June, indicating the country's economic trough may extend well into the third quarter.
Light Sweet Crude Oil futures for August delivery, the new front-month contract, dropped $3.25 or 4 percent to close at $78.20 a barrel on the New York Mercantile Exchange Thursday.
Crude prices scaled a high of $81.20 a barrel intraday and a low of $78.05.
Yesterday, oil ended near a nine-month low after an EIA report showed a big increase in crude oil stockpile in the U.S. last week. Traders also weighed the Federal Reserve move to leave its interest rate unchanged and extend the Operation Twist bond swapping program citing a slowdown in jobs.
The dollar index, which tracks the U.S. unit against six major currencies, was trading at 82.277 on Thursday, up from 81.567 in North American trade late Wednesday. The dollar scaled a high of 82.28 intraday and a low of 81.49.
The euro traded lower against the dollar at $1.2553 on Thursday, as compared to $1.2673 late Wednesday. The euro scaled a high of $1.2707 intraday and a low of 1.2552.
In economic news, eurozone suffered another steep fall in private sector activity in June, the steepest in three years, as the fallout from the debt crisis engulfing the single-currency bloc continued to hit production and new orders. The Composite Output Index, which measures the performance of both manufacturing and service sectors, remained unchanged at 46, the lowest since June 2009, a survey by Markit Economics revealed. Economists expected a decline to a reading of 45.5.
Meanwhile, U.K. retail sales recovered at a faster than expected pace in May after easing in April, the Office for National Statistics said. Retail sales volume, including automotive fuel, rose 1.4 percent from the prior month, when it was down 2.4 percent. The increase was bigger than the expected growth of 1.2 percent
First-time claims for U.S. unemployment benefits showed a modest decrease in the week ended June 16th, the Labor Department said Thursday. New unemployment claims came in at a seasonally adjusted level of 387,000 for the week, a decrease of 2,000 from the previous week's revised level of 389,000. Economists expected jobless claims to dip to 383,000 from the 386,000 originally reported for the previous week.
Reversing a slight decline in April, the Conference Board's index of leading U.S. economic indicators showed an unexpected increase by 0.3 percent in May, after edging down by 0.1 percent in April. Economists expected the index to remain unchanged.
Citing supply constraints rather than softening demand, the National Association of Realtors' report showed a slightly bigger than expected drop in U.S. existing home sales in May. Existing home sales declined by 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. Economists expected a modest decrease to an annual rate of 4.57 million.
Philadelphia-area manufacturing firms indicated weaker business conditions in June, a report by the Federal Reserve Bank of Philadelphia showed Thursday. The Philly Fed's diffusion index of current activity dropped to a negative 16.6 in June from a negative 5.8 in May. A negative reading indicates contraction in regional manufacturing activity. Economists expected the index to rebound to a positive 0.5.
The index of regional manufacturing activity dropped to its lowest level since the negative 22.7 in August 2011.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Market Analysis