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Crude Oil Drops to Five-Week Low on Weaker US Growth Outlook

Aug. 2 (Bloomberg) -- Crude oil fell to a five-week low in New York as a drop in U.S. personal spending signaled growth is slowing in the world’s biggest oil-consuming country.

Futures declined 1.2 percent after the Commerce Department in Washington said purchases slipped 0.2 percent in June, the first decline in almost two years. The decrease in prices accelerated after President Barack Obama signed a bill to raise the U.S. debt limit by at least $2.1 trillion, averting by hours a first-ever U.S. financial default.

“There’s a great deal of nervousness about the direction of the economy,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “All of the talk of a possible default has already done a lot of damage to consumer confidence. The economy wasn’t looking good before today, and now it’s looking worse.”

Crude oil for September delivery fell $1.10 to $93.79 a barrel on the New York Mercantile Exchange, the lowest settlement since June 28. Prices have climbed 15 percent in the past year.

Brent oil for September settlement declined 39 cents, or 0.3 percent, to $116.42 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.63 a barrel to New York futures, equaling the record spread based on closing prices on July 14.

Consumer purchases were forecast to increase 0.1 percent, according to the median estimate of 77 economists surveyed by Bloomberg News. Incomes grew at the slowest pace since November and the savings rate climbed.

Slowing Economy

“The economy appears to be grinding to a halt,” said Phil Flynn, vice president of research at PFGBest in Chicago. “A slowing U.S. economy changes the demand outlook for oil. We may end up with a glut, not shortages, later this year.”

The U.S. probably failed to create enough jobs in July to cut unemployment, according to a Bloomberg News survey of economists before the Labor Department’s employment report on Aug. 5.

“There’s been plenty of bad economic news,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re going to be white-knuckling it until Friday when we will see if employment rose. That should be the next catalyst for a major move.

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