Oil's Relief Rally Loses Steam


NEW YORK (TheStreet) -- The relief rally of crude oil prices came to a halt Monday as poor manufacturing data overshadowed a debt deal by lawmakers in Washington.

Brent crude futures for September delivery were shedding 70 cents to $116.04, hitting a five-day low of $114.78 earlier. They hit a month-high of $120.40 earlier Monday. West Texas Intermediate light sweet crude oil for September delivery was tumbling $1.38 to $94.32, earlier reaching to a one-month low of $93.42.
oil

The U.S. dollar index was rebounding by 1% to $74.45 as investors fled risky assets.

"The euphoria surrounding a deal being struck by congressional leaders was short-lived for crude, as a well-below consensus print for ISM manufacturing knocked the stuffing out of today's rally," said Summit Energy analyst Matt Smith. "Equities swiftly turned lower, the dollar rallied, and after some brief resistance, crude threw in the towel also. We're seeing a classic flight from risk on a bearish economic print."

The Institute for Supply Management reported that manufacturing activity fell to a reading of 50.9 in July from 55.3 in June. Economists were expecting manufacturing to remain unchanged.

Losses across a range of manufacturing sectors and little improvement in additional manufacturing jobs suggest that the economy is heading into the third quarter with less momentum than expected.

The U.S. manufacturing data was released on the heels of China's June manufacturing Purchasing Managers Index data, which slid to 50.7 from 50.9 in May, now at its lowest point since Mar. 2009.

The Census Bureau's report that construction spending rose slightly in June only provided a bit of relief because investors expect the number to be revised. Construction spending has slowed in the past six months.

Oil prices had staged a morning relief rally in response to President Obama's announcement that the White House and Republican congressional leaders had reached an agreement on raising the government's debt ceiling and cutting spending before reversing course.

The deal would cut government spending by more than $2 trillion over a decade.

Smith notes that after a sharp move lower, he's once again seen support for oil come in around the $94 mark.

Oil stocks were trading in mixed territory. Exxon Mobil ( XOM) was behind by 0.8% to $79.12, Total S.A. ( TOT) was lower by 2.3% to $52.83, Royal Dutch Shell ( RDS.A) was falling 1.9% to $72.18, Suncor Energy ( SU) was down 0.7% to $37.96, Triangle Petroleum ( TPLM) was rising 1.1% to $7.54, Kodiak Oil & Gas ( KOG) was rising 0.6% to $6.83 and Voyager Oil & Gas ( VOG) was falling 1.3% to $3.14.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

Copyright 2011 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

More from Commodities

U.S. Drillers at Mercy of Iran, Saudi Production Spat as OPEC Meeting Begins

U.S. Drillers at Mercy of Iran, Saudi Production Spat as OPEC Meeting Begins

Oil Prices Slide as Saudi Energy Minister Suggests OPEC Output Deal Imminent

Oil Prices Slide as Saudi Energy Minister Suggests OPEC Output Deal Imminent

Goldman Is Bullish on Oil, Sees Demand Outweighing Inventory Concern

Goldman Is Bullish on Oil, Sees Demand Outweighing Inventory Concern

Market Bears Have Devoured Gold Prices

Market Bears Have Devoured Gold Prices

Chevron Falls With Crude After Mizuho Analyst Touts Its Mega-Assets

Chevron Falls With Crude After Mizuho Analyst Touts Its Mega-Assets