Oil Pulls Back as Economic Concerns Grow

The October delivery contract for crude lost $1.47, or 2%, to settle at $71.63 a barrel.
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NEW YORK (

TheStreet

) -- Oil prices remained in virtual lockstep with equities Tuesday, extending declines as dismal macroeconomic data continued to erode investor expectations for economic recovery.

Oil prices were already under pressure to start the week with market participants feeling less and less confident about economic prospects after the initial weekly jobless claims came in higher than expected last Thursday.

Those concerns picked up Tuesday as losses across equities and oil futures deepened after a report showed

existing-home sales plummeted 27.2% last month. The Dow pared some of its losses after dipping below the psychologically significant 10,000-level but it still finished the session down by 134 points, or 1.3%, at 10,041. All of the other major U.S. averages also lost more than 1% on Tuesday as well.

The October crude delivery contract settled at $71.63 a barrel, losing $1.47, or 2%. The finish was within shouting distance of its session low of $71.45 a barrel.

A potential supply build was also likely weighing on sentiment during the session; although as it turned out crude oil inventories shed 1.85 million barrels in the week ended Aug. 20, according to the industry's American Petroleum Institute. Analysts polled by Platts had been forecasting a build of 1.1 million barrels.

The real test will come on Wednesday morning when the government's Energy Information Administration releases its own supply figures. In addition to an expected increase in crude stocks, analysts are also projecting a rise in distillates, to the tune of 950,000 barrels. Gasoline supplies are projected to fall by 875,000.

Unsurprisingly, energy equities also fell, as the NYSE Arca Oil index dropped 1.7%, and the Philadelphia Oil Service Sector index lost 0.6%.

Exxon Mobil

(XOM) - Get Report

and

Chevron

(CVX) - Get Report

contributed to the session's weakness, shedding 1% and 1.7%, respectively.

Elsewhere on the Nymex, September natural gas futures finished down by 3 cents, or 0.7%, at $4.04 per million British thermal units. October heating oil was off by 2 cents, or 1.2%, to settle at $1.95 a gallon, while October gasoline lost 3 cents, or 1.6%, to settle at $1.81 a gallon.

--Written by Sung Moss and Melinda Peer in New York

.