World oil prices fell more than 1 percent on Tuesday, posting their biggest daily decline in almost two weeks after U.S. data showed Midwest business activity contracted in April and European data showed record unemployment.
A survey showing a rebound in supply from OPEC producers in April further pressured prices a day after they had rallied up to $104. In mid-April, oil hit a nine-month low below $97, and Brent crude is still down over 7 percent for the month, its biggest monthly decline in 11 months.
Brent fell $1.44 to settle at $102.37 a barrel after briefly going up to $104. U.S. crude settled $1.04 lower at $93.46 a barrel, ending the month down 4 percent.
The spread between Brent and U.S. crude settled at less than $9 for the first time since December of 2011, and down from over $23 in February 2013. The spread moved between $10 and $13 for most of April.
On Tuesday, the spread was volatile, whipsawed by news that the Buzzard oil field in the North Sea would resume production within 24 hours, followed by a report from Genscape suggesting a drop in pumping volume along the Keystone pipeline.
"There's a lot of volatility in the spread. We might have seen some people who timed the spread correctly looking to take profits," said Gene McGillian of Tradition Energy in Stamford, Connecticut.
Business activity in the U.S. Midwest unexpectedly contracted in April to its lowest level since September 2009, according to the ISM-Chicago Business survey, which followed weaker-than expected U.S. first-quarter growth data released last week.
"This morning the motivating factor is the less-than-stellar Chicago purchasing report. This is industrial, it's the Midwest. Clearly with that report coming out at less than 50, then down went crude," said Dennis Gartman, editor of The Gartman Letter.
Oil traders are looking ahead to see if economic stimulus measures are forthcoming from U.S. and European central banks.
At the U.S. Federal Reserve meeting on Tuesday and Wednesday, policy makers are expected to affirm the central bank's bond-buying plan. The market will also watch this week for a rate cut form the European Central Bank.
Ongoing stimulus could spark investor buying interest, but it "may not revive physical demand for actual gasoline and diesel fuel," noted Tim Evans, energy analyst at Citi Futures Perspective in New York.
In the U.S., the world's top oil consumer, economic growth was lackluster in the first quarter, raising fears the economy could struggle to cope with Washington's austerity drive.
Traders are watching for U.S. employment reports due in the next few days and inventory data from the American Petroleum Institute and the U.S. Energy Information Administration.
"Any negative jobs guidance could begin to place more pressure on WTI than on Brent, especially if Cushing posts any build of significance," Jim Ritterbusch of Ritterbusch and Associates wrote in a research note, referring to stockpiles of the benchmark U.S. crude oil that are stored at the Cushing, Oklahoma hub.
GLOBAL DEMAND WORRIES
European data on Tuesday showed inflation in the euro zone has fallen to a three-year low and unemployment has hit a record of 12.1 percent.
German retail sales fell for the second month running in March, and Spain's economy shrank for the seventh straight quarter from January to March, preliminary data showed. Spain's recession looks set to last into next year.
"In the last couple of weeks economic data all over the world has capped the upside, and until data shows a strong rebound, there's little chance for a bounce back," said Andy Sommer, analyst at EGL in Dietikon, Switzerland.
There was bearish news on the supply side of the equation too, with supply from the Organization of the Petroleum Exporting Countries set to average 30.46 million barrels per day (bpd), up from 30.18 million bpd in March, according to a Reuters survey.
In a speech on Tuesday, Saudi Arabia's energy minister said the kingdom does not plan to expand its oil production capacity to 15 million barrels per day, dispelling a suggestion put forth by a member of his country's royal family.
In the U.S., commercial crude oil inventories likely rose last week as imports rebounded, while gasoline stocks probably fell further despite higher refinery runs, an expanded Reuters survey of 10 analysts showed on Tuesday.