NEW YORK – Oil gave back the gains it made in the past few trading days on Wednesday following discouraging economic news.
Benchmark West Texas Intermediate crude for July delivery lost $2.41, or 2.4 percent, to settle at $100.29 per barrel Wednesday on the New York Mercantile Exchange. Prices slipped after economic reports showed motorists buying less fuel, private employers adding fewer jobs than expected and U.S. manufacturing growth slowing dramatically.
Oil has wavered around $100 per barrel during the past few weeks. It's come down from highs set in early May following concerns that high fuel prices were putting too much pressure on the economy.
Payroll processor ADP added to those concerns Wednesday. The group said private employers created just 38,000 jobs in May, down from 177,000 in April. That's the weakest number since September. The government unemployment report for May is due out Friday.
The Institute for Supply Management reported that U.S. manufacturing hit the brakes in March with the sharpest monthly decline in growth since 1984. The ISM index of manufacturing for May slipped to 53.5 percent from 60.4 in April.
"The manufacturing sector was one bright spot for the economy," PFGBest analyst Phil Flynn said. "It was really pushing the economy along. Now we're wondering what's going to be driving things."
MasterCard SpendingPulse also reported that retail gasoline demand in the U.S. fell for the 10th consecutive week. Its survey estimated that Americans bought 389.2 million gallons of gasoline per day, on average. That's 2 percent less than the same week last year.
Oil was pulled even lower as the dollar rose in afternoon trading. Crude is priced in dollars and becomes more expensive as the greenback strengthens relative to foreign currencies.
In addition, global crude supplies are growing as oil operations in Iraq continue to recover from the 2003 U.S.-led invasion. Iraq's State Oil Marketing Organization said the country's oil exports averaged 2.225 million barrels per day in May, up from 2.14 million barrels per day in April.
For the next few weeks at least, investors and energy economists will keep a closer eye on SpendingPulse and other reports that estimate how much Americans are driving. U.S. highways are usually filled with vacationers during the summer, but analysts think travel will be impacted this year as soaring fuel prices squeeze family budgets.
"Summer is a real boom time for energy markets," said Michael Lynch, president of Strategic Energy & Economic Research. This year though he said a lot of people may want to keep their cars at home. "And I'm not sure if gas prices dropping from $4 to $3 per gallon is going to convince them to hop back in the car," Lynch added.
Consumers also may be dealing with higher gasoline prices in other ways.
Oil analyst Stephen Schork noted that Bureau of Economic Analysis data show that sales of used cars rose in April from March while sales of new cars declined. "Consumers are likely scaling back on new cars and putting that money toward their gasoline bills," Schork said.
Meanwhile, U.S. gasoline prices continue to drop. The national average declined for the 20th day to $3.775 per gallon ($1 a liter), according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is $1.05 higher than the same time last year.
In other Nymex trading for July contracts, heating oil gave up 4.43 cents to settle at $3.0087 per gallon and gasoline futures fell 7.30 cents to settle at $2.9773 per gallon. Natural gas lost 3.7 cents to settle at $4.629 per 1,000 cubic feet.