Crude oil drops to 1-week low as Fed jitters counter China data

Investing.com - Crude oil futures fell to a one-week low on Thursday, as ongoing uncertainty over the future of the Federal Reserve's stimulus program countered positive Chinese trade balance data.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded at USD103.57 a barrel during U.S. morning trade, down 0.8%.

Nymex oil prices hit a session low of USD103.22 a barrel earlier, the weakest level since July 31.

The September contract settled down 0.9% at USD104.37 a barrel on Wednesday.

Oil futures were likely to find support at USD102.95 a barrel, the low from July 31 and resistance at USD105.76 a barrel, Wednesday’s high.

The U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits rose by 5,000 to a seasonally adjusted 333,000 last week.

Jobless claims for the preceding week were revised up to a gain of 328,000, from a previously reported 326,000.

Analysts had expected U.S. jobless claims to increase 8,000 to 336,000 last week.

Investors have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Federal Reserve to reduce its bond purchases.

Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.

Cleveland Fed President Sandra Pianalto said Wednesday there has been “meaningful improvement” in the labor market and that tapering may be warranted if it continues to strengthen.

Her comments echoed similar remarks made by Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher earlier in the week.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

Losses were limited after official trade data released earlier showed that Chinese exports rose 5.1% from a year earlier in July, beating expectations for a 3% increase and following a 3.1% drop in June.

The data showed that imports surged 10.9%, blowing past forecasts for a 2.1% increase and following a 0.7% decline in June.

The country’s trade surplus narrowed to USD17.8 billion for the month from a surplus of USD27.1 billion in June.

The upbeat report eased concerns over a slowdown in the world’s second-largest economy.

Market players now looked ahead to a raft of Chinese economic data on Friday, including reports on inflation, industrial production and retail sales.

China is the world's second largest oil consumer after the U.S. and manufacturing numbers are used as indicators for fuel demand growth.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery shed 0.7% to trade at USD106.70 a barrel, with the spread between the Brent and crude contracts standing at USD3.13 a barrel.