The September Brent crude contract was falling $1 to $115.46 a barrel and the West Texas Intermediate light sweet crude oil contract was falling 27 cents to $93.52 even with the news that companies added 114,000 jobs in July.
In U.S. trading Wednesday investors were fretting over the possibility that the spending cuts agreed upon by lawmakers in a deal to raise the country's borrowing limit by $2.1 trillion to avoid a debt default would curtail economic growth. Lawmakers on both sides of the aisle agreed on a cut of as much as $2.4 trillion from budget deficits.
Despite the signing of the U.S. budget legislation by President Obama Tuesday afternoon, Moody's Investors Service warned that U.S. credit may be downgraded, and Martin Feldstein, President Emeritus at the National Bureau of Economic Research said there is now a 50% chance that the U.S. could fall back into a recession.
Also on Tuesday, the Commerce Department reported that personal spending decreased for the first time since September 2009, dampening hopes for robust growth going into the summer. The report came on the heels of poor manufacturing data released by both the U.S. and China the day before.
In Europe, Italian and Spanish bond spreads continued to widen, indicating that sovereign debt worries continued to be strong.
Oil prices were falling despite an unexpected decline of U.S. crude oil stocks by 3.3 million barrels reported by the American Petroleum Institute (API) after the markets closed on Tuesday and the Automatic Data Processing report that said companies added 114,000 jobs in July, slightly above the increase of 100,000 positions that economists had been expecting.
Traders will now shift their attention to U.S. factory orders and non-manufacturing survey results at 10 am ET and the Energy Department's weekly crude oil inventory numbers at 10:30 a.m. ET Wednesday. A 2 million-barrel build are expected, according to analysts polled by Platts.
"Although a draw was seen in the weekly API data released last night, the official release from the EIA today is still expected to see a build," said Summit Energy analyst Matt Smith.
Natural gas futures for September delivery were trading sideways at $4.157 per million British thermal units on ample supply and moderating weather conditions in the U.S.
"There just is not the coverage of hot weather in the North or the upper part of the East Coast," said Cameron Hanover analysts. "It is going to require a sustained and brutally hot spell to attract traders' attention."
Tropical storm Emily was heading toward the Dominican Republic and Haiti, then onto Florida, but hasn't threatened any Gulf of Mexico production, according to Smith of Summit Energy.
Oil and gas stocks were trading mixed.
was ticking down 0.1% to $99.09,
was flat at $120.04,
was lower by 0.2% at $80.62,
was trading sideways at $43.17,
was rising 1.1% to $34.51,
was falling 0.4% to $21.44 and
was ticking up 0.6% to $23.86.
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-- Written by Andrea Tse in New York.
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