U.S. Crude Touches 8-Month Low Amid Gloomy Data

Reuters

Brent crude oil dropped nearly 2 percent to hit an 18-month low of $91 per barrel on Thursday as weak economic data from China and the United States darkened the global growth outlook and pointed to lower oil demand prospects.

A technical breakdown in crude futures prices on both sides of the Atlantic also spurred further selling, with no bottom yet in sight, according to analysts.

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China's factory sector shrank for an eighth straight month in June as export order sentiment hit its weakest since early 2009, according to a survey indicating the country's economic trough may extend well into the third quarter.

U.S. jobs data added to the gloom with news that the number of Americans filing new jobless claims was little changed last week, suggesting the labor market was struggling to regain momentum.

Data also showed that U.S. manufacturing grew in June at its slowest pace in 11 months, with hiring in the sector hobbled by overseas demand for U.S. products weakening, compounding the dreary economic outlook in the world's largest oil consumer.

"We had follow through selling early and that clearly was due to the disappointment over the Fed's action yesterday that investors felt was not enough to help boost the economy," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

"This market is still looking for a bottom," he added.

In London, Brent crude oil futures for August delivery was down $1.08 at $91.61 a barrel by 10:50 a.m. EDT (1450 GMT). It slipped earlier to a low of $91, down $1.69, the weakest since December 2010.

U.S. August crude was down $1.21 at $80.24 a barrel, after earlier hitting an eight-month low of $79.82.

Brent will likely drop further to $90.05 and any rebound could be limited to a resistance at $93.66, said Reuters technical analyst Wang Tao.

For U.S. crude, the next downside target is nearby at $79.49, with a break below that level likely to trigger a further loss to $78.65, he said.

Oil futures dropped by more than 3 percent on Wednesday after the U.S. Federal Reserve signalled a weaker outlook and delivered another round of monetary stimulus, but some investors had hoped for more aggressive steps to boost the world's top economy.

Wednesday's sell-off was also spurred by a surprise increase in U.S. crude inventories in the week to June 15..