Oil prices fall after weak US data

Saturday June 27, 2009

NEW YORK: Oil prices fell Friday as traders booked profits from a strong rally and fretted about lackluster US consumer spending and new unrest in oil-producing Nigeria.

New York's main futures contract, light sweet crude for delivery in August, tumbled 1.07 dollars a barrel to close at 69.16 dollars. It had risen 1.56 dollars Thursday.

In London, Brent North Sea crude for August dipped 86 cents to 68.92 dollars.

"There are a lot of concerns about the spending data," said Ellis Eckland, an independent trader.

"We are in the driving season and the (gasoline) demand remains weak," he added.

The Commerce Department reported US consumer spending rose a tepid 0.3 percent in May from April, mainly as a result of a massive government stimulus launched by President Barack Obama.

The data showed that the personal savings rate shot up to a 16-year high, indicating consumers were wary of spending amid rising unemployment and plummeting home values.

The report particularly weighed on markets because consumer spending accounts for two-thirds of US economic activity and is considered key to recovery from the severe recession that began in December 2007.

Traders focused on the weakness in US gasoline demand in the run-up to the July 4 Independence Day holiday, which falls on Saturday this year.

"Normally, demand for gas should be peaking as the July 4 holiday approaches," said Mike Fitzpatrick of MF Global.

The American Automobile Association (AAA) earlier this week projected that the number of Americans taking off for the long holiday weekend, with July 3

being celebrated as the holiday this year, would fall 1.9 percent from 2008.

Meanwhile, the market kept an eye on rebel violence in Nigeria that has crippled oil supplies.

Crude futures had bounced higher in earlier trade after Nigeria's main rebel group said it had launched a fresh attack against an oil installation in the south of the country.

"The intensity of recent attacks have taken the market by surprise and tightened West African oil supplies," MF Global's Fitzpatrick said.


(AFP)

"Pipeline bombings, attacks on oil and gas installations, and the kidnapping of industry workers over the past several years have prevented Nigeria from pumping much above two-thirds of its installed oil output capacity of 2.5 million barrels per day," he said.