Singapore: Oil was steady near $74 on Friday, headed for a third consecutive weekly drop, as the recovery of the US economy has yet to boost fuel demand.
The US economy probably grew at an annual rate of 4.6% in the fourth quarter, up from 2.2% in the third, a Reuters poll showed ahead of the data, due at 1330 GMT.
US jobless claims fell less than expected last week, the government reported on Thursday. President Barack Obama said in his State of the Union address on Wednesday that job creation would be his top priority.
“Even though the US economy is growing, the key figure is the unemployment rate,” said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
“Until I see that the US is consistently creating jobs for a few months in a row, I’m not convinced that demand will increase.”
Oil demand in the US shrank 2% in the past four weeks from a year earlier. Japanese crude imports fell 2.6% in December and gasoline sales tumbled 2.4%, the Ministry of Economy, Trade and Industry (METI) said on Friday.
US oil for March delivery gained 9 cents to $73.73 a barrel by 0504 GMT. Prices touched $72.65 on Wednesday, the lowest intra-day price since 21 December, and are still down 12% from a 15-month high of just under $84 on 11 January.
London ICE Brent crude for March climbed 11 cents to $72.24.
Prices fell on Thursday after the US dollar rose to its highest level in more than six months against the euro, which fell on concern over potential fiscal crises in European economies including Greece and Portugal.
A stronger dollar often indicates investors are funneling cash away from riskier assets such as commodities. It also can curb demand for crude oil from buyers who hold other currencies, since oil is priced in dollars.
More fuel efficiency, alternatives
Oil use in OECD countries will never return to 2006 and 2007 levels because of more fuel efficiency and the use of alternatives, International Energy Agency chief economist Fatih Birol told Reuters on Thursday.
“I would expect that the oil price will trade within the current range for the remainder of this year, (at) $60-80 per barrel,” BP chief executive Tony Hayward said on Thursday on the sidelines of the World Economic Forum gathering in the Davos Swiss ski resort.
Thursday’s US economic data cast further doubt over the pace of economic recovery. More people than expected claimed for jobless benefits last week and durable goods orders increased less than forecast in December.
“If you may lose your job next month, you are not going to spend, buy a house, buy a car; you try to save as much as possible,” Chu said. “That is not helping the whole sentiment. I am bearish in the near future.”
Opec discipline in cutting output over the past 15 months is helping reduce an inventory surplus. Floating storage of crude and products has been declining and now stands at between 75 million and 80 million barrels, Barclays Capital said.
“In a world where, in our view, $70 per barrel is increasingly being looked at as being a barely sustainable minimum, current prices are not generating much in the way of excess rents,” Barclays Capital analysts, headed by Paul Horsnell, said in a report on Thursday.
“Key producing countries are increasingly signalling that $70 per barrel is a borderline below which, if sustained, the commitment to maintain capacity cannot be taken for granted,” Barclays Capital said.