Commodity Corner: Oil Declines on Slowing Services News

The price of a barrel of crude oil fell Tuesday after a group representing the U.S. services sector reported a slowdown in growth, signaling a weakening economic recovery.

The August oil futures contract declined 16 cents to settle at $71.98. The drop stems in part from a reduction in June economic activity in the non-manufacturing sector from the previous month, outlined in the Institute for Supply Management's Non-Manufacturing Report on Business. According to the group, which represents the country's purchasing and supply executives, the Non-Manufacturing Index (NMI) registered 53.8% in June -- 1.6 percentage points lower than the May NMI. Although growth continues in the non-manufacturing sector, ISM noted that it has slowed down in terms of services business activity/production, new orders, inventories, and order backlogs. In addition, the organization observed contracting non-manufacturing employment, new export orders, and imports.

The intraday range for oil was $71.09 to $73. 86.

Despite triple-digit temperatures in the Northeast, and the implications they have had for electrical power demand, natural gas futures for August delivery settled virtually flat after a price spike earlier in the day. Gas settled at $4.68 per thousand cubic feet, a penny lower than Friday's settlement price, after trading from $4.66 to $4.90. Major East Coast population centers such as New York City, Philadelphia, and Washington, D.C. are expected to remain under heat advisories until Wednesday evening, so the demand for electricity should continue to be particularly high throughout the Eastern Seaboard. Relatively cooler weather from the Atlantic Ocean is expected to enter the region later in the week.

August gasoline futures also remained flat on Tuesday, settling one cent lower at $1.97. The price of a gallon of gasoline ranged from $1.95 to $2.03.