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Oil Prices Spike As OPEC Reaches Deal On Production Cut

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Cloudy Economic Outlook Keeps Crude Oil Trading in Narrow Range for Week

Oil Market Summary for 07/26/2010 to 07/30/2010.

Crude oil futures continued to trade in a very narrow range, unable to cross the $79 a barrel threshold even though they ended 4.4% higher on the month.

The benchmark West Texas Intermediate rallied with the stock market late Friday to finish the week at $78.95 a barrel, virtually unchanged from $78.98 a week ago, after dipping just below $77 a barrel earlier in the week. End-of-month trading might have accounted for some the late gains, analysts said.

Government data on slowing economic growth in the second quarter drove down both oil and stock prices early on Friday. The Department of Commerce said preliminary GDP growth was an annualized 2.4%, compared with an upward-adjusted first-quarter rate of 3.7%.

The second-quarter rate was only slightly below the 2.5% forecast by economists. The figures are subject to strong revision, as indicated by the first-quarter rate, which was initially reported at 2.7%.

But the slower growth further clouded an uncertain economic picture that more positive data on manufacturing and consumer confidence later on Friday only partly dispelled.

The University of Michigan/Reuters index of consumer sentiment was revised upwards to 67.8 for the last part of July, against an initial reading of 66.5 earlier. The index was at 76 in June, however. The Chicago purchasing managers’ index rose to 62.3 in July, up from 59.1 in June, though analysts had expected a decline, indicating a slightly faster expansion of manufacturing in the region.

In a pattern that has been consistent in recent weeks, oil prices reached their low for the week on Wednesday after the Energy Information Administration yet again reported an increase in oil inventories, by 7.3 million barrels, the strongest weekly increase in nearly two years, even though forecasters had predicted a decline.

Two-thirds of 36 analysts surveyed by Bloomberg News expected oil prices either to decline or stay about the same next week, due to increased production by OPEC members in July and an expected increase in U.S. oil inventories. The remaining third expected prices to rise.

By. Darrell Delamaide for OilPrice.com




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