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UPDATE 10-Oil slips on more signs of slowing economy
July 2, 2012 / 5:56 AM / 5 years ago

UPDATE 10-Oil slips on more signs of slowing economy

* U.S., European, Chinese factory activity slowing
    * Iranian lawmakers discuss blocking Strait of Hormuz
    * Coming up: API oil data, 4:30 p.m. EDT Tuesday

 (Updates with stocks results, Iran talks detail paragraphs 11,
21)
    By Robert Gibbons
    NEW YORK, July 2 (Reuters) - Oil prices edged lower on
Monday as weak manufacturing data from the United States, Europe
and China reinforced concerns about slowing economic growth and
its threat to demand for petroleum.
    Ongoing fears about the euro zone's debt crisis helped
pressure oil as enthusiasm for a European Union (EU) bank
bailout deal faded after the agreement helped push crude prices
on Friday to their fourth-biggest daily gain on record.
    Trading was choppy and both Brent and U.S. crude futures
settled well above their intraday lows as Middle East tensions
and a strike by Norwegian oil workers supported oil prices.
    News that Iranian lawmakers had drafted a bill calling for
Iran to shut off the Strait of Hormuz to oil tanker traffic
helped limit oil's losses, especially for Brent crude.
 
    "The market is jittery, with U.S. crude falling to (an
initial intraday) low after the ISM data (U.S. factory activity)
 added to the concerns about manufacturing slowing down, but the
news from Iran showed how much uncertainty there is about that
situation," said Gene McGillian, an analyst at Tradition Energy
in Stamford, Connecticut.
    Brent August crude dipped 46 cents to settle at
$97.34 a barrel, having managed a recovery from a $95.30 low.
    U.S. August crude fell $1.21 to settle at $83.75 a
barrel, having slumped to $82.10 intraday. 
    On Friday, Brent rose more than $6 a barrel while U.S. crude
jumped more than $7, their fourth-largest daily gains in dollar
terms since the contracts were launched.
    "Oil is being driven by psychological factors," said Eugen
Weinberg, global head of commodities research at Commerzbank in
Frankfurt. "Today's selloff is a natural reaction after such
enormous gains at the end of last week."
    Trading volumes for Brent were above the 30-day average and
outpaced more tepid U.S. turnover, which lagged its 30-day
average.
    U.S. equities ended mixed, showing resilience as the barrage
of weak economic data raised the possibility of more stimulus
from the Federal Reserve. 
    The intensified concerns about economic growth overshadowed
a Sunoco Inc and private equity company Carlyle Group LP
 deal to save and expand the largest U.S. East Coast
refinery. 
    Ahead of weekly reports on U.S. oil inventories, crude
stocks were expected to have fallen last week, while refined
products stocks edged up, a Reuters survey of analysts on Monday
showed. 
    
    SLOWING GLOBAL MANUFACTURING
    The U.S. Institute for Supply Management's (ISM) index of
national factory activity fell in June to 49.7, dipping below
the 50 mark that separates expansion from contraction for the
first time since July 2009. 
    The ISM report added to concerns and followed Markit's final
U.S. PMI index showing the manufacturing sector grew in June,
but at its most sluggish rate in 18 months. 
    Euro zone manufacturing took another downturn in June and
factories are preparing for worse. 
    Manufacturing in China also worsened in June with export
orders posting their biggest fall since December.
  
    China's demand for West African crude oil for July is
expected to fall to a 2012 low following refinery run cuts, a
Reuters survey of traders showed. 

  
 
    IRAN TENSIONS
    Iran's National Security and Foreign Policy Committee has
drafted a bill calling for Iran to try to stop oil tankers from
shipping crude through the Strait of Hormuz helped curb oil
price losses, especially for Brent crude. 
    The action by Iranian lawmakers comes after a European Union
embargo on Iran's oil took effect on Sunday, hoping to curb
Tehran's ability to finance its controversial nuclear program.
    Recently revived talks on Tehran's nuclear ambitions,
between Iran and the five permanent members of the U.N. Security
Council plus Germany, did not resolve the dispute when the
parties last met in Moscow in June.
    As the EU embargo took effect, a strike by Norway's offshore
oil and gas workers entered its second week and has begun to
slow crude exports, according to a trading source.
 [ID:ID:nL6E8HQ76Y]
    Unions were scheduled to meet on Tuesday to decide on
whether to escalate the strike.

 (Additional reporting by Gene Ramos in New York, Christopher
Johnson in London; and Jessica Janagathan; Editing by Dale
Hudson, Bob Burgdorfer, Sofina Mirza-Reid and Marguerita Choy)

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