Oil below $78 a barrel in Europe as global stocks drop ahead of Q2 US GDP report

Friday, July 30, 2010

Oil falls below $78 as global stocks drop

LONDON — Oil prices fell below $78 a barrel Friday as investors worried about the state of the U.S. economic recovery ahead key growth data due later in the day.

Benchmark crude for September delivery was down 56 cents to $77.80 a barrel by mid-afternoon European time in electronic trading on the New York Mercantile Exchange. The contract rose $1.37 to settle at $78.36 on Thursday.

Most European and Asian stock markets were lower and Wall Street was expected to fall on the open as investors worried that the U.S. economy is rapidly losing steam.

Oil traders often look to stock markets as a barometer of overall investor sentiment.

After weeks of relatively downbeat data out of the U.S., caution has been growing ahead of the second-quarter U.S. economic growth number, due to be announced later Friday. Analysts expect GDP expanded about 2.5 percent in the April-to-June quarter, slowing from 2.7 percent in the first quarter.

Some analysts expect the global economy to slow in the second half, undermining demand for oil.

“The global recovery heading into slow motion will leave the market well supplied, subsequently putting downside pressure on prices,” Saxo Capital said in a report.

Saxo expects prices to fall to $60 at the end of the year, “barring geopolitics or devastating hurricane.”

In other Nymex trading in August contracts, heating oil fell 1.27 cents to $2.0245 a gallon, gasoline dropped 0.049 cents to $2.0925 a gallon and natural gas rose 2.6 cents to $4.853 per 1,000 cubic feet.

Brent crude was down 44 cents to $77.15 a barrel on the ICE futures exchange.

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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