By Claudia Assis and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures slipped nearly 2% on Friday as the U.S. grew less than expected in the second quarter and the country’s debt concerns weighed on investors and raised worries about energy demand.
Crude for September delivery CL1U -1.61% lost $1.83, or 1.9%, to $95.60 a barrel on the New York Mercantile Exchange. It had traded as low as $94.95 a barrel.
A dim showing for U.S. gross domestic product numbers pulled oil lower.
U.S. output rose 1.3% in the second quarter of the year, below the 1.6% rate that economists had expected. Read more about GDP.
The Commerce Department also said the recession in the U.S. had been even deeper than previously thought. See more about the recession's revisions.
The losses handily erased crude’s mild gains in the previous session, after improving jobs and housing data brightened the economic outlook and made investors more optimistic about oil demand.
That sentiment was clouded Friday by the impasse in the U.S. debt-ceiling debate, as the House of Representatives cancelled a Thursday night vote on the Republican plan to raise the nation’s debt limit. Read more about the U.S. debt-ceiling debate.
The U.S. government must legislate to raise the debt ceiling before Aug. 2., or risk triggering a default.
Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said investors are “marking time” ahead of a decision on the debt-ceiling.
He said a successful vote to raise the debt limit is likely to send oil prices higher in the short term.
“There will be euphoric buying because everything is out of the way, equity markets go up, and if equity markets go up, commodity markets will fly up. Until someone starts to realize that it’s actually a negative, because they’re not solving their issues,” Barratt said.
He said any bout of relief buying will overshadow the impact that U.S. government spending cuts — part of the agreement required to increase the debt-ceiling — will have on the outlook for crude.
“When the government pulls the plug, like when the Federal Reserve pulled the plug on the [monetary stimulus] spending, then that should create a marker … that says the use for oil is not going to as much as it should be,” he said.
Cyclone watch
Tropical Cyclone Don strengthened in its path toward the Texas coast early Friday, according to the National Hurricane Center.
The storm was forecast to hit land by Friday night or Saturday morning local time, the NHC said.
Major U.S. oil companies had started to remove employees from the areas expected to be affected by Don, and to cut production, which also contributed to Thursday’s higher prices for oil futures.
