Forexpros – Crude oil futures erased modest overnight gains during U.S. morning trade on Thursday, slumping to a fresh seven-month low following the release of disappointing U.S. gross domestic product figures and downbeat jobs data, which added to concerns over the strength of the U.S. economy.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD87.47 a barrel during U.S. morning trade, shedding 0.4%.
It earlier rose by as much as 0.45% to trade at a session high of USD88.28 a barrel.
Prices dropped to USD87.19 a barrel immediately following the release of the U.S. data, the lowest since October 24, 2011.
Oil prices fell to the lowest levels of the day after the U.S. Commerce Department said that the U.S. economy grew at a slower rate than initially estimated during the first three months of 2012, as consumer spending figures were revised lower.
U.S. gross domestic product increased at a seasonally adjusted annual rate of 1.9% during the first quarter, in line with expectations and down from a preliminary estimate of 2.2%.
The data primarily reflects a downward revision to personal consumption, which grew 2.7% compared to a previous estimate of 2.9%.
Consumer spending typically accounts for nearly 70% of U.S. economic growth.
Meanwhile, concerns over the strength of the U.S. labor market grew after weekly data from the U.S. Department of Labor showed that the number of individuals filing for initial jobless benefits rose by 10,000 to 383,000 last week, defying expectations for a decline of 3,000 to 370,000.
The report came after payroll processing firm ADP said non-farm private employment rose by 133,000 in May, missing expectations for an increase of 148,000.
Attention now shifts towards U.S. employment data on Friday. The non-farm payrolls report is expected to show the world’s largest economy added 150,000 new jobs in May.
Oil traders have long been taking cues from the monthly jobs report, the most-closely followed indicator of U.S. employment, because it offers insight into the economic health of the world’s biggest crude oil consumer.
An improving economy is generally correlated with increased demand for oil and fuel products like gasoline.
Oil traders were looking ahead to the U.S. Energy Information Administration’s closely-watched weekly report on U.S. stockpiles of crude and refined products due later in the day.
The report was expected to show that U.S. crude oil stockpiles rose by 0.50 million barrels last week to the highest level since 1990, underscoring fears over a slowdown in oil demand from the U.S.
The report comes out a day later than usual due to the U.S. Memorial Day holiday on Monday.
After markets closed Wednesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories fell by 0.35 million barrels last week, defying expectations for an increase of 0.60 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery dipped 0.45% to trade at 103.00 a barrel, with the spread between the Brent and crude contracts standing at USD15.53.
Earlier in the day, Brent prices touched USD102.80 a barrel, the lowest since December 19. For the month, London-traded Brent crude lost 13%, the most since May 2010.
Appetite for riskier assets came under pressure amid sustained concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession hit economy fuelled fears that Madrid will be forced to seek an international bailout.
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