Oil price swings above $106 on US data, Syria

AP News
Posted: Aug 26, 2013 9:26 AM

The price of oil fluctuated above $106 a barrel Monday as traders pondered disappointing U.S. orders for durable goods and how they would affect the U.S. Federal Reserve's plans about winding down its economic stimulus.

By early afternoon in Europe, benchmark oil for October delivery was down 7 cents to $106.35 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it swung between $106.06 and $107.37.

The contract gained $1.39, or 1.4 percent, to close at $106.42 on Friday. Oil rose after the U.S. government said that Americans cut back sharply in July on purchases of new homes, a sign that higher mortgage rates may weigh on the housing recovery.

On Monday, the U.S. Commerce Department said that orders for durable goods — those meant to last at least three years — fell 7.3 percent in July, the largest drop in almost a year. The data pointed to a struggling manufacturing sector.

Some saw the weak data as an indication that the Fed may need to wait before slowing down its bond-buying program. A slower phase-out of the Federal Reserve's monetary stimulus could also keep the dollar weaker, making commodities that are traded in dollars more appealing to investors with other currencies.

The ongoing conflicts in the Middle East — especially in Syria and Egypt — continued to prevent prices from falling further, although analysts said gains would also be limited. There are signs that the United States could be closer to an armed response against the regime of Syrian President Bashar Assad if claims are confirmed that his forces used chemical weapons.

"For as long as the important infrastructure in the Middle East is not jeopardized and there are no fears of the conflict spilling over to other countries in the region, the oil price is unlikely to make any major leaps upward," said a note from Commerzbank in Frankfurt. "The relaxed supply situation will counter any significant price rise."

Experts also said oil prices could soon be supported by weather factors.

"According to the forecasts, there is an increased hurricane risk in the Gulf of Mexico in the next few weeks," Commerzbank said. "Not only are numerous oil and gas fields located there; the U.S. Gulf Coast is also home to key export terminals and refineries."

Brent crude, which sets prices for imported oil used by many U.S. refineries, was down 36 cents to $110.68 a barrel on the ICE Futures exchange in London.

In other energy futures trading on Nymex:

— Heating oil fell 1.25 cents to $3.0865 per gallon.

— Natural gas added 5.2 cents to $3.537 per 1,000 cubic feet.

— Wholesale gasoline lost 1.76 cents to $2.8531 per gallon.


Pamela Sampson in Bangkok contributed to this report.