Oil slips on economy worry

By @ibtimes on

Oil retreated on Thursday, as investors focused on disappointing economic data, but dollar weakness and renewed violence in Yemen helped limit losses.

Crude oil had gained sharply on Wednesday as traders initially focused on an unexpected drop in U.S. distillate stocks.

However the figures from the Energy Information Administration showed domestic crude stocks rising, countering expectations of a fall, which underlined the gloomy outlook for demand.

The net result was that there was a build in inventories, so I think the move was a bit overdone yesterday, Simon Wardell, oil analyst at Global Insight said.

By 1148 GMT Brent crude futures for July were down 55 cents to $114.37 per barrel. U.S. crude dropped 59 cents at $100.72.

Both benchmarks rose around 2 percent on Wednesday to close at their highest since May 10.

Wardell noted that U.S. crude had been trading in a fairly tight range around $100 per barrel for around three weeks.

We're poised, balancing between risks about what will happen to the global economy on the demand side and risks to supply from events in the Middle East.

Investors looking for more evidence on whether the global economic recovery is on track, and how this could affect demand for commodities like oil, will watch U.S. GDP data at 1230 GMT.

The U.S. government is expected to report that the economy grew at a 2.1 percent annual rate in the first quarter, according to a Reuters survey, rather than the 1.8 percent pace it estimated last month.

Employment data will also be eyed.

Fears of spreading turmoil in the Middle East were rekindled by a brewing civil war in Yemen as dozens were killed in overnight gun battles.

Analysts said the tensions in the region have added a $10-$20 security premium to oil prices, as investors focus on risks to supply.

The dollar retreated against the euro and slipped against a basket of currencies <.DXY>, making commodities priced in the greenback more attractive to consumers using other currencies.

Analysts were divided over the longer-term direction of oil prices, as upward revisions of price forecasts by Wall Street banks Goldman Sachs and Morgan Stanley earlier this week deepened the divide between the bulls and the bears to levels unseen since oil prices peaked in 2008.

(Additional reporting by Francis Kan in Singapore; editing by William Hardy)

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