INV: Crude oil holds losses after U.S. data, Syria remains in focus
Investing.com - Crude oil futures held on to losses on Thursday, despite data showing that U.S. second quarter growth was revised higher and jobless claims fell, indicating that the recovery is on track.
Futures sold off as investors speculated military action against Syria was not imminent. Prices rallied sharply in recent sessions amid indications the U.S. was moving closer to taking military action against Syria’s government.
On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD109.31 a barrel during U.S. morning trade, down 0.7%.
Prices fell by as much as 1.3% earlier in the session to hit a daily low of USD108.63 a barrel.
The October contract settled up 1% at USD110.10 a barrel on Wednesday, after hitting a high of USD112.22 a barrel, the strongest level since May 3, 2011.
Oil futures were likely to find support at USD105.89 a barrel, the low from August 27 and resistance at USD112.22 a barrel, Wednesday’s high.
The Commerce Department said gross domestic product increased at a seasonally adjusted annual rate of 2.5% in the three months to June, above expectations for growth of 2.2% and up from a preliminary estimate of 1.7%.
A separate report from the U.S. Department of Labor showed that the number of individuals who filed for unemployment assistance fell by 6,000 to a seasonally adjusted 331,000 last week, compared to forecasts for a decline of 5,000.
The stronger-than-expected data added to speculation the Fed could taper down its bond purchases at its next policy meeting amid increasing signs of a recovery in the U.S. economy.
The central bank is scheduled to meet September 17-18 to review the economy and assess policy.
The possibility that the Fed could scale back its stimulus program helped buoy the U.S. dollar.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.65% to trade at 81.97, the strongest level since August 5.
Dollar-denominated oil futures contracts tend to fall when the dollar gains, as this makes oil more expensive for buyers in other currencies.
Meanwhile, market participants remained cautious amid concerns over an impending U.S.-led military strike against Syria, following the alleged use of chemical weapons.
On Wednesday, President Barack Obama said the U.S. has concluded that the Syrian government carried out a chemical weapons attack near Damascus, but added that he had not yet made a decision about whether to intervene militarily.
While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.
Market players are also concerned about the involvement of Iran, OPEC’s sixth-biggest oil producer.
Comments by Iran's military chief of staff Hassan Firouzabadi on Wednesday suggested that Tehran would attack Israel if Washington decides to strike Syria.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for October delivery dropped 0.6% to trade at USD115.95 a barrel, with the spread between the Brent and crude contracts standing at USD6.64 a barrel.
Brent prices hit USD117.32 a barrel on Wednesday, the highest level since February 20.
French lender Societe Generale said London-traded Brent prices may rise to as high as USD150 a barrel if conflict disrupts supply from the Middle East and North Africa.
Countries in the Middle East and North Africa were responsible for 36% of global oil production and held 52% of proved reserves in 2012.
