Oil prices struggle as economic data tempers gains

Oil prices continued to slip below $72 a barrel Wednesday, extending a 13 percent fall over three weeks, as poor economic indicators fueled worries about energy demand.

By early afternoon in Europe, benchmark crude for October delivery was down 8 cents at $71.55 a barrel in electronic trading on the New York Mercantile Exchange. The contract tumbled $1.47 to settle at $71.63 on Tuesday amid news of a big fall in U.S. home sales for July.

The price of crude has retreated sharply in the past three weeks, creating a buying opportunity for traders. This helped limit losses in oil prices Wednesday despite weaker Asian and European stock markets and a stronger dollar.

Prices took a beating Tuesday after the U.S. National Association of Realtors said sales of previously occupied homes fell 27.2 percent in July to an annual rate of 3.83 million, far below what analysts expected. That report adds to high unemployment and sluggish manufacturing activity in the key Mid-Atlantic region as evidence of a slowing U.S. economic recovery.

"Approaching the lower end of OPEC's comfort zone of $70 to $80 per barrel, international crude prices currently mark a stark contrast to the high of above $82 per barrel seen in early August, thereby illustrating the deterioration of economic sentiment since then," said a report from JBC Energy in Vienna.

U.S. oil and gasoline supplies, meanwhile, remain above the five-year average. Demand has been mediocre for most of the summer and refiners are cranking out products near their operating capacity, keeping inventories high.

The Energy Department will release its updated supply picture later Wednesday. American Petroleum Institute figures released late Tuesday showed an unexpected draw of 1.85 million barrels in crude inventories last week but gasoline supplies rose by 692,000 barrels.

This was in contrast to an analyst survey by Platts, the energy information arm of McGraw-Hill Cos., which forecast a rise of 1.1 million barrels of crude oil stocks and a drop of 875,000 barrels in gasoline supplies.

Analysts pegged $70 a barrel as a strong floor price for crude in the near term amid uncertainties about the global economic recovery but expects prices to rise to the high $70s by the end of the year.

In other Nymex trading in September contracts, heating oil rose 0.47 cent to $1.9404 a gallon while gasoline fell 0.32 cent to $1.8462 a gallon. Natural gas was down 0.6 cent at $4.033 per 1,000 cubic feet.

In London, Brent crude was up 4 cents at $72.42 a barrel on the ICE Futures exchange.