Oil down to near $70

August 10, 2009 6:47:54 AM PDT
Oil prices fell to near $70 a barrel Monday as investors looked to statistical data due later this week for a reading of the strength of U.S. consumer spending. By mid-afternoon in Europe, benchmark crude for September delivery was down 59 cents to $70.34 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract fell $1.01 to settle at $70.93.

Crude prices have fluttered near $71 and $72 a barrel for about a week as investors try to gauge how strong a U.S. economic recovery will be this year. The government said Friday that the unemployment rate fell to 9.4 percent in June, but gasoline demand has been weak this summer.

This week, the U.S. government will report July retail sales, and Wal-Mart Stores Inc. and Macy's Inc. will announce their second quarter results.

"There's evidence that the economy as a whole is turning around," said Toby Hassall, an energy analyst with Commodity Warrants Australia in Sydney. "But consumer demand is still really flagging."

"Over the next six to 12 months we're going to have to see evidence of the consumer sector picking up."

Analysts at JBC Energy in Vienna concurred, saying that the encouraging U.S. employment figures could be a "glimmer of hope that the world's largest economy may slowly be returning to health."

At the same time, JBC noted that oil prices had not managed to break through recent highs despite the promising jobs data.

"A rise beyond the $75-per-barrel mark might be difficult without fundamental backing," JBC Energy wrote in a report. "Accordingly, we could also be at the beginning of a correction phase."

London's KBC Market Services said any mood shifts regarding the economic resurgence could easily send oil prices to the basement.

"A break in the current sentiment toward better economic prospects and a postponement of the oil demand pickup could lead to a violent downward correction in oil prices led by the enormous stocks overhang," KBC said.

In other Nymex trading, gasoline for September delivery was down 1.04 cents to $2.9977 a gallon and heating oil rose 0.01 cent to $1.9123. Natural gas for September delivery gained 3.6 cents to $3.710 per 1,000 cubic feet.

In London, Brent prices fell 31 cents to $73.28 a barrel on the ICE Futures exchange.

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Associated Press writer Alex Kennedy in Singapore contributed to this report.

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