Oil prices fell on Friday, headed for a weekly loss after a report showed weak US economic growth and as Congress kept wrangling ahead of the August 2 deadline to raise the government debt ceiling and avoid default. The US economy stumbled in the first half, according to Commerce Department data that showed a weaker-than-expected 1.3 percent growth rate in the second quarter.
"The slowdown in second-quarter economic activity has been confirmed, and the reading will add to concerns about the remainder of the year," said John Kilduff, partner at Again Capital LLC in New York. Two other reports showed business activity in the US Midwest grew less than expected this month as the labour market weakened, while US consumer sentiment fell in July to its lowest point in more than two years.
ICE Brent crude for September fell 66 cents to $116.70 a barrel by 3 pm (1900 GMT), after falling as low as 115.75. US September crude fell $1.74 to settle at $95.70 a barrel, the lowest close in two weeks and with the $94.95 intraday low just above the 200-day moving average of $94.88 a barrel.
US crude fell 4.2 percent for the week, snapping a string of four weekly gains. For the month, front-month crude managed a 28-cent gain. US gasoline and heating oil futures also slipped on Friday as front-month August contracts expired. Trading volumes remained tepid, with Brent and US crude volumes both below 30-day averages.
Friday's choppy trading allowed Brent's premium to US crude to push above $21 intraday. The Reuters-Jefferies CRB index, a global commodities benchmark fell 0.7 percent as investors fretted over the US economy and the likelihood of default.
US stocks fell, but pared losses after the S&P 500 briefly fell below its own 200-day moving average. Europe's sovereign debt problems remained in focus as ratings agency Moody's put Spain on review for a possible downgrade. Moody's action was significant for markets because, "Spain is a big country. Greece is a small country - we can bail them out, but Spain is another story," Thorbjorn Bak Jensen, analyst at Global Risk Management, said.
A day after producers started reducing oil and natural gas output in the Gulf of Mexico as Tropical Storm Don headed toward the Texas coast, some production platforms were being restaffed. Tropical Storm Don is expected to hit the Texas coast late on Friday or on Saturday, the US National Hurricane Center said.
Nearly 12 percent of US Gulf of Mexico crude output remained shut on Friday, according to government data, but analysts believe the storm's relative weakness and projected path made prolonged production outages or energy infrastructure damage unlikely. A tropical wave accompanied by a well-defined low pressure system in the central Atlantic had a medium, 30 percent chance of becoming a tropical cyclone during the next 48 hours, the NHC said.