* China July factory sector grows at fastest pace in 18
* Weak demand from European refiners creating contango
* IMF cuts growth forecasts in U.S., China
(Updates prices to settlement, adds Brent-WTI spread)
By Anna Louie Sussman
NEW YORK, July 24 Oil futures prices fell on
Thursday as unseasonably weak demand and plentiful supplies of
crude and refined products offset strong Chinese factory data
that could presage higher energy demand in the world's No. 2 oil
China's factory activity in July posted its fastest
expansion in 18 months as new orders surged, a preliminary HSBC
Europe's demand outlook was dimmer. Due to an influx of oil
products from the United States, European refiners have been
cutting runs or even idling plants at what should be one of the
busiest times of the year.
This has pressured physical crude prices, with West African
and North Sea barrels selling slowly even at bargain levels.
"Brent is lower as a function of the fact that we're at peak
refinery season and there isn't a lot of demand in the U.S. for
Brent quality oil," said Stephen Schork, editor of The Schork
Report in Villanova, Pennsylvania.
Brent for September delivery lost 96 cents to settle
at $107.07 a barrel, after closing 70 cents higher on Wednesday.
U.S. crude lost $1.05 to settle at $102.07 a barrel,
after gaining 73 cents in the previous session.
The spread CL-LCO1=R between the two benchmarks closed at
"Brent is in contango, reflecting weak demand from European
refiners," said Ole Hansen, senior commodity strategist at Saxo
Bank. Contango is a situation in which the price of oil for
near-term delivery is cheaper than that for delivery further
into the future.
U.S. RBOB gasoline led the complex lower, down 0.94 percent
U.S. Labor Department unemployment data on Thursday
suggested that the economic recovery remained on track, with
initial weekly jobless claims falling to their lowest since
The International Monetary Fund on Thursday chopped its 2014
forecast for global economic growth to take into account
weakness early in the year in the United States and China, the
world's two biggest oil consumers.
NO SUPPLY CONSTRAINTS
Conflicts in Eastern Europe and the Middle East were also
keeping a floor under prices but crude supply from Iraq remains
unaffected by fighting there.
Analysts expect no sustained gains in oil prices unless
supply is disrupted but some say the market has become
complacent about the risks.
"Oil was overpriced to begin with and now the geopolitical
risk is starting to come down, which I think is healthy for the
market," said Oliver Sloup, director of managed futures at
iitrader.com in Chicago.
In another development, South Korea and Japan bought the
first condensate cargoes to be exported from the United States
since the easing of a 40-year ban on U.S. crude exports.
(Additional reporting by Lorenzo Ligato in New York, Claire
Milhench in London and Jacob Gronholt-Pedersen in Singapore;
Editing by Jason Neely, Jane Baird, Diane Craft and James