Oil falls as investors turn pessimistic

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Oil dipped on Friday, surrendering earlier gains as investor sentiment turned pessimistic, analysts said.

New York's main contract, light sweet crude for August delivery, fell 43 cents to 76.08 dollars a barrel.

Brent North Sea crude for August delivery dropped 57 cents to 75.90 dollars per barrel.

Both contracts were higher in earlier Asian trade as investors had focused on the better-than-expected US job claims data released on Thursday by the Labor Department.

"There have been some concerns because of the Fed's comments about the US economy which is still struggling to recover," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

However, investors drew positives from the latest US labour data, which could augur well for oil demand in the world's largest energy-consuming nation, Shum told AFP.

Data from the Labor Department showed new claims for US jobless benefits fell to 457,000 in the week ending June 19, a decrease of 19,000 from the previous week's revised figure of 476,000.

Most economists had expected claims to fall to 460,000.

"So the report beat expectations and there are still some elements of data indicating recovery in the US," Shum said.

Investors' fluid perceptions of the global economy, especially on the US, will dictate the movement of crude oil prices, analysts from the Commonwealth Bank of Australia said.

"The price action in oil markets over the past week is a reminder that oil market fundamentals remain soft for now, leaving oil prices vulnerable to shifting perceptions of the international economic outlook," they said in a commentary.

On the US economy, the data have so far been mixed, they added.

The Federal Reserve had raised concerns about the pace of the US economic recovery on Wednesday after it held key interest rates at historic lows of between zero and 0.25 percent.

The Fed had maintained its federal funds rate target at these levels since December 2008 to help the economy recover from its worst recession in decades.

Household spending, which usually accounts for two-thirds of the country's economic activity, "is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit," the Fed said.

© 2010 AFP

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