Markets: News  

Oil falls below $80 on weak China, U.S. data

SAN FRANCISCO (MarketWatch) -- Crude-oil futures fell Thursday, ending below $80 a barrel and on their sharpest decline since December as weak global economic data kept fears of less demand for oil in the forefront.

Natural-gas futures advanced, as a weekly U.S. supply report for the fuel came in within expectations.

Crude for August delivery (CLQ2) retreated $3.25, or 4%, to settle at $78.20 a barrel on the New York Mercantile Exchange, its lowest since early October.

It was also oil's worst one-day percentage loss since mid December.

"There's just a lot of bad news out there," said Jason Schenker, president of Prestige Economics in Austin.

Manufacturing activity in the Philadelphia region contracted sharply this month, falling to its weakest since August, and sales of existing homes fell 1.5% in May as there were fewer lower-priced homes available.

The Labor Department said first-time filings for jobless benefits edged lower but at a level indicating no improvement in U.S. hiring trends. Read more about unemployment benefits data.

In addition to the U.S. data, there was residual disappointment over the Federal Reserve's policy decision Wednesday, and a stronger dollar kept the pressure on, Schenker said.

Earlier Thursday, an initial reading by investment bank HSBC showed manufacturing in China dropping to a seven-month low in June. Full story: China's PMI weakens.

Spain's borrowing costs climbed at a government debt auction, and later it was revealed that recapitalization needs for the nation's banks may reach 62 billion euros. Read more on Spanish banking-sector audit.

Oil has struggled in recent sessions. On Wednesday, energy traders had to contend with a surprise increase in U.S. crude inventories amid expectations of a decline, contributing to a 2.7% pullback on the day.

Meanwhile, gains in the dollar also contributed to the lower prices for oil and other commodities Thursday. The U.S. dollar index (DXY) rose to 82.192, up from 81.567 late Wednesday. Read more in Currencies.

Other energy futures tracked oil lower, with natural gas the outlier.

July gasoline (RBN2) declined 4 cents, or 1.6%, to $2.55 a gallon. July heating oil (HON2) was off 6 cents, or 2.4%, to $2.53 a gallon.

Natural gas for July delivery (NGN12) jumped 6 cents, or 2.6%, to $2.58 per million British thermal units.

The Energy Information Administration reported an increase of 62 billion cubic feet in supplies for the week ended June 15. Analysts surveyed by Platts had expected a rise between 63 billion and 67 billion cubic feet for the week.

The increase was smaller than both the 90-bcf jump seen in the corresponding week last year and the five-year average rise of 87 bcf.