Oil tracks gains in stocks, erases early losses
NEW YORK (AP) — An afternoon recovery in U.S. stock markets helped oil reverse early losses Thursday.
Benchmark oil for July delivery fell 3 cents to close at $94.25 a barrel on the New York Mercantile Exchange. The price sank as low as $92.21 in the morning after weak manufacturing data from China raised questions about the strength of oil demand in the world's No. 2 economy.
Global stock markets showed sharp declines amid indications that the U.S. Federal Reserve's may pull back on its economic stimulus program. Tokyo's Nikkei 225 index of shares fell 7.3 percent. But U.S. stocks recouped most of their losses by midday, as investors saw the declines as overdone. Oil traders followed, at one point pushed oil to a small gain.
HSBC Corp. said a preliminary version of its monthly purchasing managers' index fell to 49.6 for May from 50.4 in April. Numbers below 50 indicate contraction. That sank oil prices because a downturn in energy-hungry China would likely lead to a decline in crude demand.
Ample U.S. supplies of crude oil and refined products such as gasoline continue to weigh on oil prices, even as the summer driving season gets underway in the U.S. with Memorial Day weekend. AAA's prediction that for the third time in four years more than 31 million Americans would hop in the car and drive 50 miles or more didn't sway analysts.
"Ahead of the start of the summer driving season, (gasoline) stocks are 6 percent up on the long-term average and 10 percent higher than last year's level," said a report from Commerzbank.
The average price of a gallon of gas held steady at $3.66, up 6 cents from a week ago although still 2 cents cheaper than at this time last year.
Brent crude, a benchmark for many international oil varieties, fell 16 cents to $102.44 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline rose 1 cent to $2.83 a gallon.
— Heating oil lost 1 cent to $2.86 a gallon.
— Natural gas rose 8 cents to $4.26 per 1,000 cubic feet.
Pablo Gorondi in Budapest and Pamela Sampson in Bangkok contributed to this report.