US crude falls after weak consumer data

Oil production drops.01 June 2013, News Wires – US oil prices fell below $93 a barrel on Friday, extending losses after another round of weak economic data, while OPEC oil exporters agreed to leave their output target unchanged as expected, with little impact on markets as a result.

US data showed consumer spending fell in April for the first time in almost a year, indicating the economic recovery may be stalling.

Further weighing on expectations for global oil demand growth, euro zone data released during the session showed unemployment reached a new high in April. The figures underscored just how severe a challenge EU leaders face to revive the bloc’s economic fortunes.

Brent oil was 66 cents lower at $101.53 a barrel by 1430 GMT, extending its losses into a third straight session and heading for the lowest finish since the start of May.

US oil was down 75 cents at $92.86 a barrel, and also heading for the lowest close in almost a month.

OPEC oil exporters said they would leave the group’s output target unchanged at 30 million barrels per day, as expected, given market prices are currently in line with top producer Saudi Arabia’s preferred level of $100 a barrel.

Saudi Arabia’s oil minister Ali al-Naimi told reporters on Friday markets were balanced and US shale oil production was not a concern.

“For Nigeria it’s certainly already had a big impact on their exports to the US, but for many other members, they know that shale is high cost production,” said Richard Mallinson, chief policy analyst at Energy Aspects Ltd, commenting on OPEC’s relaxed attitude towards US shale oil.

“So if oil prices fall US producers may start rapidly cutting production,” he said.

In addition to weak economic data, a stronger dollar also weighed on oil during the session. The dollar index was slightly stronger on Friday, climbing from a near three week low earlier this week on hopes the US monetary stimulus would continue.

A stronger US currency makes dollar denominated commodities more expensive for holders of other currencies.

“OPEC should not be a big input,” said Petromatrix analyst Oliver Jakob, commenting on the day’s movement in prices. “There is lots of volatility in currencies.”

That said, while monetary policy may be supportive in the short run, looking further ahead, efforts by central banks to stimulate economic output may bolster oil prices only for a limited time, according to Jefferies Bache oil analysts.

“Eventually, bearish oil balances will become too difficult to ignore and enough liquidation will develop to send crude benchmarks to our long stated downside targets of $85 and $95 in WTI and Brent,” the analysts said.

“In the meantime, some more choppy price action with a downward bias would appear to lie ahead.” (Additional reporting by Manash Goswami; editing by Richard Pullin and Keiron Henderson)

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