Crude Oil Ends Below $104 On Demand Concerns

(RTTNews) - U.S. crude oil ended lower Thursday, after having made significant gains yesterday, on mixed macroeconomic data with activity in the U.S. service sector declining and uncertainty related to the partial government shutdown.

Investors continued to worry over crude oil demand growth prospects on some soft macroeconomic data from the U.S., even as the partial shutdown entered a third day with lawmakers failing to reach a consensus on the budget.

Nevertheless, oil pegged back some of the losses for the session on hopes the Federal Reserve will go slow on tapering its quantitative easing program following some less than encouraging macroeconomic data, prolonged budget talks, and fears of a bigger showdown over raising the debt ceiling.

Oil also found some support after data from the China Federation of Logistics and Purchasing and the National Bureau of Statistics showed the index measuring performance of the non-manufacturing sector, which includes services and construction industries, rose to a six-month high of 55.4 in September from 53.9 in August.

Light Sweet Crude Oil futures for November delivery, the most actively traded contract, declined $0.79 or 0.8 percent to close at $103.31 a barrel on the New York Mercantile Exchange Thursday.

Crude prices for November delivery scaled a high of $104.38 a barrel intraday and a low of $103.12.

Yesterday oil surged to end sharply higher recouping much of the losses recorded in the last few days when investors mulled over the impact of the partial shutdown of the U.S. Government on oil demand. Oil snapped a three-day loss, with investors largely ignoring an Energy Information Administration weekly oil report that showed U.S. crude stockpiles to have jumped more than expected last week.

An Energy Information Administration report yesterday showed U.S. crude oil inventories to have moved up by 5.50 million barrels and gasoline stocks gained 3.50 million barrels in the week ended September 27. Analysts expected U.S. crude oil inventories to add 2.5 million barrels and gasoline stocks to shed 0.70 million barrels last week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.75 on Thursday, down from 79.92 late Wednesday in North American trade. The dollar scaled a high of 79.92 intraday and a low of 79.63.

The euro traded higher against the dollar at $1.3624 on Thursday, as compared to its previous close of $1.3578 late Wednesday in North America. The euro scaled a high of $1.3646 intraday and a low of $1.3578.

In economic news from the U.S., the Labor Department said initial jobless claims inched up to 308,000, an increase of 1,000 from the previous week's revised figure of 307,000. Economists had been expecting initial jobless claims to climb to 315,000 from the 305,000 originally reported for the previous week.

Separately, the Institute for Supply Management said its non-manufacturing index dropped to 54.4 in September from 58.6 in August. While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a much more modest decrease to a reading of 57.0.

From the eurozone, Germany's service sector activity increased at the fastest pace in seven months in September, but to a lesser extent than estimated earlier, final data from a survey by Markit Economics and BME showed. The seasonally adjusted purchasing managers' index for the service sector advanced to 53.7 in September from 52.8 in August, hitting the highest level since February. Initially, the index for September was estimated to have risen to 54.4.

Meanwhile, private sector business activity across the eurozone improved slightly more than previously estimated in September, final results of a survey by Markit Economics revealed. The composite output index, that measures performance of both manufacturing and service sectors, rose to a 27-month high of 52.2 in September from 51.5 in August. The flash estimate was 52.1.

Eurozone retail sales increased more than expected in August, latest figures from Eurostat revealed. Retail sales increased 0.7 percent month-on-month in August compared with forecast for a 0.2 percent growth. This followed a 0.5 percent rise in July and a 0.8 percent decline in June.