Crude oil futures were moderately higher Thursday after new U.S. jobless claims fell sharply in the latest week and June retail sales showed an unexpected modest gain.
Traders said the news would be a welcome sign of improvement in the U.S. economy, but it is overshadowed by greater concerns about a possible downgrading of U.S. government debt as the White House and congressional leaders remain at impasse on a budget agreement.
Meantime, the world's biggest oil consumer is showing a marked slowdown in demand. The Energy Information Administration said Wednesday that U.S. oil demand dropped to a two-month low in the week ended July 8. Gasoline use fell to an eight-year low for the July 4 holiday week, and demand for distillate fuel (diesel and heating oil) dropped to a 20-month low.
Light, sweet crude oil futures on the New York Mercantile Exchange were 62 cents higher at $98.67 a barrel. ICE North Sea Brent crude for August delivery was down 18 cents at $118.76 a barrel ahead of its expiration at the settlement. September Brent was 33 cents lower, at $117.52 a barrel.
The Labor Department said new U.S. jobless claims fell by 22,000 in the week ended July 9, well beyond the 3,000 drop expected by economists surveyed by Dow Jones Newswires. Retail sales rose a slim 0.1% in June, the Commerce Department said, beating the forecast for a 0.2% drop. Producer prices in June dropped 0.4%, more than the expected 0.2% decline. The drop was the first in a year.
Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that economic growth has been modest so far in 2011 and that the pace is likely to remain moderate.
"There's been a bit of a tepid reaction" to the economic news, said Tom Bentz, a director at BNP Paribas Commodity Futures in New York. He noted that the dollar declined against the euro in response to news that Moody's Investors Service said it was reviewing the government's top AAA bond rating for a possible downgrade, citing the "rising possibility" that the government's $14.29 trillion borrowing limit won't be raised soon enough to prevent default on payments.
"The concern is a downgrade of the U.S. would not be a good thing for anybody," he said.
Prices of petroleum products were mixed, with August-delivery gasoline futures down 1.12 cents at $3.1404 a gallon and heating oil futures up 1.72 cents at $3.1169 a gallon.