Oil falls toward $106 despite European growth
The price of oil fell to near $106 a barrel Wednesday as traders responded cautiously to data showing that a stubborn recession in the 17-nation eurozone has ended.
By early afternoon in Europe, benchmark crude for September delivery was down 60 cents to $106.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 72 cents to close at $106.83 on Tuesday.
The European Union countries that use the euro saw their collective economic output grow by 0.3 percent in the April-June quarter from the previous quarter, according to data released Wednesday. That's the first quarterly growth since the eurozone slipped into recession at the end of 2011. But the result came largely on the back of improving conditions in Germany and France, which had already escaped the most grueling effects of the recession.
The results are likely to be "cold comfort indeed to the remaining European countries that remain burdened down with negative growth, high levels of debt and steep unemployment," Michael Hewson, senior market analyst at CMC Markets, said in an email commentary.
A relatively stronger dollar also worked against oil prices. Oil is traded in dollars and becomes a less attractive investment for holders of other currencies when the value of the greenback rises. The euro was down to $1.3243 on Wednesday from $1.3260 late Tuesday in New York.
In recent days, the dollar has posted gains against the Japanese yen, the Swiss franc, and the currencies of commodity-driven countries including Australia and Canada. That could partly explain the falling price of oil in the face of the brighter economic data from Europe and the U.S.
Looking ahead, investors will monitor renewed protests in Egypt, which controls the Suez Canal crucial for Middle East oil shipments, and falling oil exports in Libya and Iraq.
Markets were also awaiting information later Wednesday on U.S. stockpiles of crude and refined products from the Energy Department's Energy Information Administration.
Data for the week ending August 6 is expected to show draws of 1.5 million barrels in crude oil stocks and 2 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
A release late Tuesday from the American Petroleum Institute showed crude stocks dropping by 1 million barrels but large builds in refined products, including an increase of 1.7 million barrels in gasoline inventories, said a report from Sucden Financial Research in London.
Brent crude, traded on the ICE Futures exchange in London, was down 48 cents to $109.34 a barrel.
In other energy futures trading on Nymex:
— Heating oil retreated 1.45 cents to $3.0326 a gallon.
— Wholesale gasoline fell 1.3 cents to $2.8064 a gallon.
— Natural gas added 2.7 cents to $3.312 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.