London: Oil prices slid from earlier highs on Thursday as prospects for slower growth in the world’s top economy dampened sentiment, outweighing a sliding dollar and signs of lower North Sea supplies.
US crude for June fell four cents to $112.72 a barrel by 3:48pm, after earlier touching the highest in 2-1/2 years of $113.70 a barrel. Brent crude futures fell 1 cent to $125.12 a barrel.
“I think there are some concerns about how the US GDP will come out for Q1. The dollar is still weak, while oil is falling, so I think it’s demand driven. It’s the uncertainty about the demand from the US,” said oil analyst Thorbjorn Bak Jensen at Global Risk Management.
Federal Reserve chairman Ben Bernanke said on Wednesday the US labour market was still in a “very, very deep hole” and opted to keep interest rates unchanged, lowering expectations for growth prospects and fuel demand.
US economic growth likely braked sharply to 2% in the first quarter as higher food and gasoline prices crimped consumper spending, according to a Reuters survey ahead of a Commerce Department estimate of first quarter GDP at 6:00pm.
Earlier, oil prices were boosted by news the US dollar fell to a three-year low on Thursday, spurring buying for commodities among both non-dollar buyers and investors looking to switch from cash.
Oil trader Robert Montefusco at Sucden Financial said the market reversal was due to profit-taking ahead of a UK holiday in honour of the royal wedding of Prince William to Kate Middleton.
Signs of lower supplies from the North Sea also boosted the Brent benchmark earlier on Thursday, with at least two Forties cargoes cancelled and others delayed from the May loading programme.
Light, sweet oil sourced from the North Sea has served as a vital substitute for Libyan exports which are virtually paralysed due to conflict and international sanctions.
Oil prices are still carrying a hefty risk premium due to political unrest in the Middle East, with Ben Westmore of National Australia Bank estimating this as high as $20-$25.
Syrian security forces have killed at least 500 civilians in a crackdown of a “peaceful democratic uprising”, Syrian human rights organisation Sawasiah said on Thursday.
On the supply front, US gasoline inventories fell by 2.51 million barrels to 205.59 million barrels, the Energy Information Administration showed on Wednesday, the lowest level since August 2009 and the lowest level for April since 2007.
Analysts had forecast a 1.1 million-barrel draw.