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Oil prices fall despite strong US GDP, inventories data

Oil prices fell on Wednesday (July 30), putting the US benchmark futures contract within a whisper of US$100 a barrel despite a larger-than-expected decline in US crude supplies and heightened geopolitical tensions.

NEW YORK: Oil prices fell on Wednesday (July 30), putting the US benchmark futures contract within a whisper of US$100 a barrel despite a larger-than-expected decline in US crude supplies and heightened geopolitical tensions.

The main US contract, West Texas Intermediate (WTI) for September closed at US$100.27 a barrel, down 70 cents from Tuesday's closing level on the New York Mercantile Exchange. In London, Brent North Sea crude for delivery in September dropped US$1.21 to settle at US$106.51 a barrel.

Traders appeared to look past the headlines on better-than-expected official gross domestic product (GDP) data for the United States, the world's largest consumer of crude oil. The US economy grew at a robust annual rate of 4.0 percent in the second quarter, rebounding from a 2.1 percent slump in the first quarter linked to bad winter weather, the Commerce Department reported.

The dollar was boosted by the GDP news, climbing to its highest level against the euro since November 12, at one euro for US$1.3367. A stronger greenback tends to weigh on dollar-priced oil.

But the Federal Reserve, after a two-day meeting, left unchanged its key interest rate, held at near-zero since late 2008, and stuck to its plan to raise the rate only in the second half of 2015.

"US GDP data was stronger than expected, but gives rise to the idea the Fed may raise interest rates somewhat sooner than previously estimated, supporting a stronger US dollar that may be limiting buying interest in WTI," said Tim Evans of Citi Futures.

The Department of Energy said that crude-oil stockpiles fell by 3.7 million barrels to 367.4 million barrels in the week ended July 25, slightly double the decrease expected.

At the key oil hub in Cushing, Oklahoma, which serves as a reference for WTI, supplies dropped to 17.9 million barrels, their lowest level since November 2008. The draws in crude and Cushing should have been "kind of bullish," said Gene McGillian of Tradition Energy, but "the market shrugged that off."

Meanwhile, traders also appeared to be ignoring the heightened tensions in Ukraine and the Middle East, said Tim Evans of Citi Futures. "Brent supplies remain at risk from violence in Libya and Iraq, and sanctions against Russia, but the market is remaining calm in the face of it, suggesting ample current supplies," he said.

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