Oil prices fell on Friday after data showing tepid U.S. economic growth in the third quarter left investors cautious ahead of expected monetary easing from the U.S. Federal Reserve.
End-of-month positioning and profit taking along with the expiration on Friday of U.S. November refined oil products contracts also were cited as factors pressuring oil, along with disappointing economic data out of Germany and India.
The U.S. economy grew at a 2.0 percent annual rate, up from 1.7 percent in the second quarter and in line with expectations but unable to chip away at high unemployment.
U.S. crude for December delivery fell 95 cents, or 1.16 percent, to $81.23 per barrel by 12:54 p.m. EDT (1654 GMT). A finish above $79.97 would still allow oil to post a second straight monthly gain and the first monthly close above $80 a barrel since April.
In London, ICE Brent December crude fell 67 cents, or 0.8 percent, to $82.92 a barrel.
“The initial (GDP) estimate was in line with expectations, but might be seen as strong enough to limit the size of the anticipated Fed move to ease — the so called QE2,” Tim Evans, analyst at Citi Futures Perspective in New York, said in a note.
QE2 is a term used by Fed watchers for the expected second round of quantitative easing, or purshases of government debt, by the U.S. central bank.
A strong dollar pressured crude early, but the dollar index .DXY seesawed and the greenback fell sharply against the yen on the expectations of more monetary easing. The dollar held its gains versus the euro.
U.S. stocks were little changed as investors continued to assess prospects for monetary stimulus by the Federal Reserve and ahead of elections that could change the balance power in Washington. .N
Investors remain cautious ahead of U.S. mid-term elections next Tuesday and the prospects that the Fed will announce another round of asset buying next Wednesday.
“Today’s economic data was not overly inspiring and the allure of large quantitative easing moves by the Fed is vanishing,” said Phil Flynn, analyst at PFGBest Research in Chicago.
“At the same time we’ve seen U.S. crude stocks rise even though demand is not that high. Other news has been bearish. India’s crude oil imports are down and China is raising petroleum prices.”
The U.S. Energy Information Administration reported on Wednesday that domestic commercial crude oil stocks rose 5 million barrels in the week to October 22, much more than forecast.
