Oil exchange traded funds were suffering losses of 5% Thursday as investors sold commodities and stocks and fled to safe havens such as bonds and cash. The U.S. Oil Fund (NYSEARCA:USO) fell 5.6%.
Crude oil futures dropped below $87 a barrel in Thursday’s selling after touching $100 in July.
U.S. crude stockpiles increased to 354 million barrels last week. The Institute for Supply Management’s index of non-manufacturing businesses declined from 53.3 in June to a worse-than-expected in July — readings above 50 indicate growth.
Oil has fallen lower over the past several days on weak data that suggests the U.S. economic recovery is faltering, reports Dan Strumpt for The Wall Street Journal.
Additionally, observers are closely watching the figures on gasoline demand as it is weakening during the peak season. According to the EIA, gasoline demand for the month of July dropped 3.6% year-over-year, the lowest July reading in nine years.
“You can argue whether or not we’re in a recession, but the demand numbers make it sound like we’re in a recession,” stated Phil Flynn, oil analyst at PFG Best in Chicago.
Additionally, Saudi Arabia, the world’s largest producer of oil, has increased production to its highest level since the 1980s to offset the lower output by Libyan exporters. Last week, 3.6 million barrels of crude form the Strategic Petroleum Reserves entered the markets.
U.S. Oil Fund
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Max Chen contributed to this article.