Oil steady below $75, near six-week lows

By @ibtimes on

U.S. crude oil prices hovered below $75 a barrel and near six-week lows after weak U.S. economic data this week raised doubts about the top oil-consuming nation's ability to work through the most ample petroleum inventories in two decades.

U.S. crude prices for September rose 2 cents to $74.45 a barrel by 0845 GMT on expiry day for the contract, after falling the previous two sessions.

The more actively traded October contract dipped 5 cents to $74.72 a barrel while the Brent contract for the same period was up 20 cents at $75.50 by the same time.

Oil prices slid to a six-week low of $73.83 a barrel on Wednesday after data from the Energy Information Administration showed U.S. oil stocks rose to 1.130 billion barrels in the previous week -- the highest level in at least 20 years.

Since then, the already frail U.S. economic recovery received fresh setbacks after jobless claims rose to a nine-month high last week and mid-Atlantic manufacturing shrank in August, alerting the market to the dangers of a stubborn supply overhang.

Even measured by the subpar nature of the macro numbers we have been seeing in recent weeks, Thursday's batch of figures were particularly disappointing....Excessive gains are getting rolled back given the slow-growth track we seem to be on, said Edward Meir at MF Global in a research note.

He added that, for now, hurricane-related jitters are setting an effective floor beneath oil prices but added that this could collapse if no storms enter the oil-rich U.S. Gulf of Mexico before the end of the season.

The National Hurricane Center cut to 10 from 20 percent the chance that a tropical wave in the western Caribbean Sea near Central America would strengthen into a depression in the next 48 hours.

RANGE-BOUND TRADE

Oil prices have fallen by 10 percent from early August highs of around $83 a barrel and are now back in the $70-$80 a barrel range where they have mostly traded since last October.

Some analysts flagged the risk of further losses if the recovery prospects for the U.S. economy continue to worsen.

The fundamentals of oil are not pretty...if the poor macroeconomics force some deleveraging we have to be ready for the risk of sharp downward corrections, said Olivier Jakob, trading adviser at Petromatrix.

But for now, technical analysts predict that prices are stuck within a miniature range between $73-$76 a barrel.

Traders will look to the Economic Cycle Research Institute index due, a measure of future U.S. economic growth, for a fresh perspective on the demand outlook.

Equities are also likely to give direction as oil price gains are now showing an unusually high correlation with equities, analysts said.

European stocks edged higher in early trade on Friday, halting a sharp two-day retreat. .EU

(Additional reporting by Alejandro Barbajosa; editing by Keiron Henderson)

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