Crude oil falls on signs of economic weakness

The price of crude has declined for the first time in three days, after a report showed a sharp drop in orders for durable goods.


By mid-afternoon in New York, crude oil futures for October were down 0.3% at $106 per barrel.

The fall came as the Commerce Department revealed that durable goods orders decreased 7.3% in July, the biggest drop since August 2012. The magnitude of the drop in orders came as a surprise, with a survey conducted by Reuters before the release of the data forecasting a 4.0% decrease.

Durable goods are classified as being items expected to last for three years or more, which tend to be expensive items. With orders dropping so substantially in August, it paints a picture that businesses are downbeat about the outlook for the economy, being reluctant to invest in items for the future.

Durable goods can be volatile because of the nature of the items involved, where demand can be erratic, especially within the transportation area, but even excluding transportation, orders dropped 0.6%. This does not bode well for future crude oil demand

The Crude price was also pressured by news from Libya that it had resumed exports from the port of Brega, one of four ports closed after force majeure was announced on 18 August. Libya has the biggest reserves of oil in Africa, so a resumption in Libyan exports is fundamentally bearish for oil prices, all other things being equal.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.