Oil below $72 on concerns economic recovery slow

[September 18, 2009]  KUALA LUMPUR, Malaysia (AP) -- Oil prices weakened Friday in Asia, dampened by concerns that a recovery in the U.S. economy may be slower than expected.

Benchmark crude for October delivery fell 81 cents to $71.66 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 3 cents to settle at $72.47 on Thursday.

Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore, said oil prices pulled back in tandem with a slide in regional stock markets and a stronger U.S. dollar.

The moves followed new U.S. government data indicating a slow economic recovery, which may mean less demand for energy by the world's largest crude user in the near term.

"There is a supply overhang in both crude oil and products. Oil pricing at a $70 plus level is quite vulnerable given the weak fundamentals," Shum said.

The recession has sapped American fuel consumption, and U.S. oil stockpiles are 14 percent larger than last year. The Energy Information Administration said Wednesday that the country also is sitting on a sea of distillate fuels including heating oil, with stockpiles approaching a 27-year high.

The government reported Thursday that natural gas stockpiles continue to grow as well and are now at 16.4 percent above the five-year average for this time of year.

There are some bright spots.

The Labor Department said new claims for unemployment benefits fell to the lowest level since July. And the Commerce Department said housing construction in August surged to the highest level in nine months with a flurry of new apartment building projects.

While on the surface that would suggest energy consumption may rebound, the jobless numbers however, are far below levels that would indicate a healthy economy.

Shum said oil has traded within the $65-$75 a barrel since July and likely to stay within this range in the coming months.

In other Nymex trading, gasoline for October delivery slipped 0.72 cent to $1.8440 a gallon, and heating oil fell 0.8 cent to $1.8329 a gallon. Natural gas rose 6.7 cents to $3.515 per 1,000 cubic feet.

In London, Brent crude fell 71 cents to $70.84.

[Associated Press; By EILEEN NG]

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.