London: Oil fell towards $73 a barrel on Friday, snapping a two-day rally and heading for a third straight week of losses on lingering doubts over the outlook for US oil demand.
The US government is expected to revise second-quarter gross domestic product growth lower on Friday to an annual pace of 1.4% from 2.4%, a Reuters survey shows, in another signal of lacklustre economic recovery in the world’s biggest fuel consumer.
Friday’s negative sentiment eclipsed a positive US jobs report in the previous session, which helped boost front-month US crude by almost 1.2% on Thursday.
U.S. crude for delivery in October fell 17 cents to $73.19 a barrel by 1:14pm, after touching an intraday trough of $70.76 on Wednesday, the lowest price since early June. Prices have slid about $10 from a peak near $83 on 4 August.
October ICE Brent slid 10 cents to $74.92.
“The fundamental picture is very negative,” said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
“If you get supportive data in terms of GDP and stimulus, prices could go to the top of the trading range, but if it comes lower than expected, the environment is so negative that we could see a break of $70.”
Although new U.S. jobless claims fell more than expected last week, they were too high to signal a shift in a weak labour market that is constraining economic growth.
Later on Friday in a speech to fellow central bankers, US Federal Reserve chairman Ben Bernanke is likely to discuss the uncertain prospects for the economy, but is not expected to give many clues about whether the central bank will pump more cash into the economy to keep the recovery going.
Weakness in the consumer sector has slowed energy demand growth in the US, sending the nation’s total petroleum inventories to their highest since weekly records began in 1990.
Bloating US inventories are depressing prices of US benchmark West Texas Intermediate crude relative to North Sea Brent. The premium of front-month Brent futures over front-month WTI jumped to as high as $1.80 on Thursday, the widest since early June, receding to about $1.65 on Friday.
Front-month US crude is also trading at discounts to contracts for the following months, a market structure known as contango.
Tropical Storm Earl in the eastern Atlantic Ocean continued to move westward on Thursday, with the US National Hurricane Center still expecting the system to become the season’s third hurricane by Saturday.
Early computer models still show the storm moving west and the northwest, away from key oil and gas producing areas in the Gulf of Mexico. Hurricane Danielle, which strengthened to Category 3, was also expected to stay in the Atlantic.