February 25, 2010 / 4:04 AM / 9 years ago

Oil falls over 2 percent on recovery concerns

NEW YORK (Reuters) - Oil dropped more than 2 percent toward $78 a barrel on Thursday as weak U.S. employment and durable goods data raised more concerns about a recovery in the world’s top energy consumer.

A man refuels his car at a petrol station in Sydney October 26, 2009. REUTERS/Daniel Munoz

Demand for a wide range of U.S. manufactured goods unexpectedly fell in January, while new applications for jobless benefits rose again last week, suggesting a step back in the economic recovery.

U.S. crude futures for April fell $1.83 to settle at $78.17 a barrel, after earlier falling as low as $77.05. London Brent crude lost $1.80 to settle at $76.29

“Economic data is testing the optimism of some investors who had hoped that rebounding economic growth would push up demand for commodities,” said Carsten Fritsch, analyst at Commerzbank.

“The markets are reassessing the assumption that a solid recovery is already in place in the United States, and economic figures from the euro zone have also been weak.”

Earlier news that rating agencies may downgrade Greece’s sovereign debt rating refocused attention on the weak fiscal health of some euro zone countries and weighed on markets.

An early rise in the dollar against the euro pressured commodities prices, but a late rally in the euro helped take crude off its lows.

U.S. jobless claims data suggested the world’s biggest energy consumer was recovering more slowly than expected. The number of U.S. workers filing initial claims for unemployment benefits rose unexpectedly in the latest week, a U.S. Labor Department report showed.

New orders for long-lasting U.S. manufactured goods excluding transportation unexpectedly fell in January, suggesting a loss of momentum in the economic recovery.

Oil markets have looked to the broader economy for signs of a rebound since the recession sent prices from over $147 a barrel in July 2008 to below $40 in December of that year. Signs of a rebound that could bolster demand and draw down inventories have helped push prices back up since then.

U.S. crude oil stockpiles rose by 3 million barrels to 337.5 million barrels in week ended February 19, data from the Energy Information Agency showed on Wednesday. But U.S. gasoline inventories fell 900,000 barrels to 231.2 million barrels, versus analysts estimates of a 400,000-barrel build.

U.S. refiners normally start stockpiling in April for the driving season, which starts at the end of May and peaks in June-July.

Reporting by Matthew Robinson, Gene Ramos, Robert Gibbons and Ed McAllister in New York and Christopher Johnson in London; Editing by David Gregorio

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