U.S. crude futures extended losses on Friday as sluggish economic indicators raised doubts about the sustainability of a recent acceleration in demand growth by top oil consumer the United States.
Investors also looked at the outlook for demand in China, the second-largest oil consumer, where economic growth is expected to slow in the second half of this year and double-digit growth is for the full year seems unlikely, central bank adviser Xia Bin said on Friday.
Jobless claims in the U.S. unexpectedly increased last week as the manufacturing, construction and education sectors shed workers, a report showed on Thursday.
Factory activity growth braked to its slowest pace in 10 months in the U.S. Mid-Atlantic region in June, raising concerns that an anemic U.S. economic recovery is faltering.
Front-month West Texas Intermediate (WTI) crude futures fell for a second day, shedding 57 cents to $76.22 at 0644 GMT on the New York Mercantile Exchange (NYMEX).
That is 13 percent lower than an early-May 19-month peak above $87, although prices were headed for a second straight week of gains, having recovered 18 percent from below $65 on May 20.
There is still an element of caution, said David Moore, an analyst at the Commonwealth Bank of Australia.
U.S. economic data is quite uneven and that's raised doubts about the robustness of the economic recovery. Fundamentally, the market is not tight. Inventories are high and there is surplus capacity, Moore said.
But ICE Brent futures weathered the weak U.S. economic statistics better, supported by easing concern about Spain's sovereign debt woes. August Brent slipped 21 cents on Friday to $78.47 after rising on Thursday.
Spain's Treasury does not need to sell any more bonds to deal with a 24 billion euro ($29.43 billion) bout of debt repayments in July, an economy ministry source said on Thursday.
Japanese stocks posted their biggest weekly rise in three months after the government on Friday upgraded its economic assessment for the first time in three months.
U.S. stocks rose in a late rally on Thursday, while European shares and the euro gained on reassuring demand for Spanish government bonds.
RISING DEMAND, INVENTORIES
Overall oil product demand in the U.S. advanced by 1.9 percent in the past four weeks from a year earlier, the Energy Information Administration said on Wednesday. Distillate use jumped almost 14 percent in the same period.
But brimming crude stockpiles at the Cushing, Oklahoma, pricing point for WTI, which rose 200,000 barrels to 37.6 million barrels last week according to the EIA, put additional pressure on U.S. crude prices relative to European benchmark Brent, analysts including Moore said.
Comparing August contracts, WTI was trading about 90 cents lower than Brent on Friday. The front-month July WTI contract is likely to behave more erratically as it nears expiry on June 22.
Often these things occur when there are high levels of liquidity at Cushing, Moore said. WTI expiry is getting close and you normally get some changes in positions.
U.S. lawmakers accused BP (BP.L)(BP.N) Chief Executive Tony Hayward of evasion and ducking responsibility for the worst oil spill in U.S. history when he appeared before them on Thursday to answer charges his company cut corners on its blown-out Gulf of Mexico well.
The U.S. has banned deepwater drilling for six months, raising some concern that oil production growth in the Gulf will slow. But the U.S. may also introduce legislation to curb fuel consumption as response to the environmental disaster caused by the spill.
Prices of long-dated WTI, including contracts for delivery in December 2018, the farthest available, have remained relatively steady around $95 since BP's Deepwater Horizon explosion on April 20. In the meantime, the front of the forward curve has declined from almost $82 to less than $78.
It's always the case that the longer-dated prices are more stable that then short term, because they are affected by long-term expectations, Moore said.
In ten years time, we are not necessarily assuming that cyclic conditions are going to prevail. I don't think it's just related to the BP oil spill.
(Editing by Ed Lane)