Oil prices fell Thursday, erasing some of the big gain in the previous session, as fresh economic data from the United States suggested more weakness in the world’s biggest oil consuming nation.
By afternoon in Europe, light, sweet crude for September delivery was down $2.17 at $124.60 a barrel on the New York Mercantile Exchange.
The contract soared $4.58 to settle at $126.77 a barrel on Wednesday, as a U.S. agency reported America’s gasoline stocks unexpectedly fell last week and Iran vowed to continue its nuclear program.
On Thursday, the U.S. Commerce Department said gross domestic product grew by 1.9 percent in the second quarter of the year, less than the 2.4 percent growth expected by a poll of economists by Thomson Financial/IFR.
Earlier data also was revised downward. The weak 1 percent GDP figure of the first three months of 2008 was modified lower to 0.9 percent, while an earlier estimate of annual growth of 0.6 percent in the last quarter of 2007 now showed a negative number, with the economy contracting by 0.2 percent on annual basis in that period.
Wednesday’s large increase came amid very low trading volumes for the Nymex contract and may be showing a distorted reflection of the market, analysts said.
”The current low liquidity is making it hard to be fully confident about the sustainability of the rebound seen (Wednesday),” said Olivier Jakob of Petromatrix in Switzerland. ”Overall U.S. demand is still a bearish concern.”
Crude has fallen over the last three weeks from a record high of $147.27 on July 11, in part, on expectations that the spike in prices over the last year has begun to dampen U.S. demand for gasoline.
But the Energy Information Administration said Wednesday in its weekly inventory report that U.S. gasoline supplies fell 3.5 million barrels last week. Analysts surveyed by energy research firm Platts expected gasoline supplies to increase by 400,000 barrels.
Gasoline stocks had risen in three previous three weeks.
”That weekly data series is very useful, but very erratic week to week,” Moore said. ”I hesitate to read too much into the stocks decline.”
Analysts indicated that despite the reduction, gasoline stocks were still relatively ample.
”It should be pointed out that gasoline stocks are healthy and remain 3 percent above the 5-year average,” said a report by JBC Energy in Vienna, Austria.
Also, the EIA figures showed while gasoline demand reached a yearly high of 9.47 million barrels a day, that still was 2 percent lower than a year ago, JBC said.
Only days remain until a deadline expires for Tehran to show it will stop expanding its uranium enrichment program, at least temporarily, or face the threat of new U.N. sanctions.
But there were no signs Wednesday that Tehran was willing to bend as Iranian officials, including supreme leader Ayatollah Ali Khamenei, pledged to continue the country’s nuclear program.
”We are not giving up our nuclear activities, including enrichment,” said Ali Ashgar Soltanieh, Iran’s top representative to the International Atomic Energy Agency.
Also Wednesday, more than 100 nonaligned nations backed Iran’s right to peaceful uses of nuclear power.
”It’s quite likely that tensions around Iran’s nuclear program will again become an issue for the market,” said David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney. ”The deadline for Iran to respond is ticking away.”
In other Nymex trading, heating oil futures rose 0.54 cent to $3.5257 a gallon while gasoline prices were up 0.30 cent to $3.1381 a gallon. Natural gas futures rose 2.3 cents to $9.271 per 1,000 cubic feet.
In London, September Brent crude was up 20 cents to $127.30 a barrel on the ICE Futures exchange.