Oil down second day as stimulus hopes falter

Tue Jul 31, 2012 6:07pm EDT
 
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By Robert Gibbons

NEW YORK (Reuters) - Oil prices fell for a second straight day on Tuesday on expectations that any central bank stimulus may be insufficient to revive economic growth, even as hopes dimmed that the U.S. Federal Reserve will act this week to boost the economy.

Supportive data from the United States, including higher home prices, improved consumer confidence and Midwest business activity, was seen as lowering the chance of more stimulus from the Fed when its two-day policy meeting ends Wednesday.

"Oil prices are lower on the paradox of slightly better economic data in the form of the Chicago PMI and the consumer confidence reading," said John Kilduff, a partner at Again Capital LLC in New York.

"The slightly positive readings may keep the Fed from acting as fully as the markets have priced in. Also, the comments from various German leaders have taken away some the expectations for ECB action," Kilduff added.

Even with two days of losses, Brent crude ended July up 7.28 percent for the month, snapping a string of three monthly declines, as revived tensions over Iran's dispute with the West about Tehran's nuclear program and North Sea oil production problems supported crude prices.

U.S. crude posted a 3.65 percent monthly gain, ending a two-month streak of declines.

Brent September crude fell $1.28 to settle at $104.92 a barrel, then dropped to $104.10 in post-settlement trade.

U.S. September crude slumped $1.72 to settle at $88.06 a barrel, then dropped as low as $87.31 in post-settlement trade.   Continued...