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The Canadian Press - ONLINE EDITION

Oil slides as mixed economic data and China reports put brakes on rising prices

By: Deborah Jian Lee, THE ASSOCIATED PRESS

12/03/2010 4:22 PM

MATT ROURKE / THE ASSOCIATED PRESS Enlarge Image

In this June 27, 2008 file photo, a man pulls a gas pump from his vehicle after filling his tank in Philadelphia.

NEW YORK - Oil prices ended the week lower following mixed economic reports that kept investors on edge about the outlook for improving energy demand.

On Friday, benchmark crude for April delivery slid 87 cents to settle at US$81.24 a barrel on the New York Mercantile Exchange. Prices jumped as high as $83.16 earlier, after the U.S. Commerce Department reported a surprise increase in February retail sales and the International Energy Agency said world energy demand this year could be better than previously thought.

The IEA, based in Paris, predicted in its monthly report that oil demand will average 86.6 million barrels a day this year, or 1.6 million barrels a day more than in 2009, up slightly from last month's forecast.

PFGBest analyst Phil Flynn said IEA's report of "astonishing" demand growth out of China pushed prices higher before traders backed off.

"That's the third report this week that showed China's demand growth is going to be strong," said Flynn.

Still, he thinks China's growth raises concerns. "The bottom line is the Chinese government is leading the global economy out of a recession, but if they end up popping, everyone will feel the reverberations," said Flynn.

U.S. retail sales rose 0.3 per cent in February. Analysts expected a decline of 0.2 per cent. The increase was the biggest since November and provided some hope that the recovery from the Great Recession is picking up speed.

One energy analyst warned that consumers may be spending a little more, but are still worried about their jobs and losing their homes to foreclosure. "A return to pre-recession profligacy appears out of the question, for the moment," said Mike Fitzpatrick of MF global.

This week a few economic data points nudged oil back and forth, but for the most part prices held steady in a tight range, settling between $81.24 per barrel on Friday and $82.11 on Thursday. Flynn said traders are waiting for more significant economic news to guide their plays, with next week's U.S. Federal Reserve meeting and the OPEC ministers meeting in Vienna on their radar.

In other Nymex trading in April contracts, heating oil fell 2.1 cents to settle at $2.094 a gallon, and gasoline lost 1.7 cents to settle at $2.255 a gallon. Natural gas gave up four cents to settle at $4.4 per 1,000 cubic feet. Earlier it hit a 52-week low of $4.412 per 1,000 cubic feet.

In London, Brent crude fell 89 cents to settle at $79.39 on the ICE futures exchange.

Associated Press writers Barry Hatton in Lisbon, Portugal and Alex Kennedy in Singapore contributed to this report.

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