Commodity Corner: Oil Plunges on GDP Report
Light sweet crude oil for September delivery lost nearly 2.4 percent Friday after the U.S. Department of Commerce estimated that the real gross domestic product (GDP) grew at an annual rate of only 1.3 percent in the second quarter of this year.
The WTI settled at $95.70 a barrel Friday, down $2.31 from the previous day, after the latest figures from the Commerce Department's Bureau of Economic Analysis (BEA) revealed disappointing real GDP figures for the first half of the year. Real GDP is the monetary value of goods and services produced by labor and property in the United States.
The 1.3 percent figure for the second quarter, an advance estimate, failed to meet private-sector expectations of 1.8 percent, the Commerce Department stated. In addition, the BEA revised its first quarter real GDP figure downward from 1.9 percent to a paltry 0.4 percent.
"Today's first look at GDP in the second quarter confirms what we already knew: The economy isn't growing as fast as it needs to," Commerce Secretary Gary Locke said in a written statement. Locke also implied that the economic situation might improve if Congress and the Administration agree on a plan to increase the national debt by authorizing the federal government to raise its borrowing limit from the current $14.3 trillion. "And every day that we fail to act to lift the debt ceiling and inch closer to default, we threaten our economic progress and job creation," he warned.
Brent futures fell less dramatically Friday, ending the day 0.5 percent lower at $116.74 a barrel after fluctuating from $115.80 to $117.06. The WTI peaked at $97.39 and bottomed out at $94.95.
As of 4 p.m. Central Daylight Time Friday, the center of Tropical Storm Don was approaching the South Texas coast. The storm caused offshore operators to shut in approximately 6.2 percent of current natural gas production in the Gulf of Mexico, according to the Bureau of Ocean Energy Management. However, operators were already sending workers back to offshore installations as early as Friday morning.
Given the minimal impact of the storm offshore, along with an Energy Information Administration report that the country's natural gas inventories grew at a larger-than-expected rate last week, natural gas lost 2.2 percent Friday. The September contract price settled at $4.145 per thousand cubic feet.
Natural gas traded within a range from $4.14 to $4.23.
Gasoline for August delivery settled at $3.11 a gallon, down a penny from Thursday. The intraday range for gasoline spanned from $3.07 to $3.12.