OREANDA-NEWS. August 16, 2010.  Light, sweet crude for September delivery closed down 35 cents at USD 75.39/bbl on the NYMEX, after sliding to a session low of USD 75.01. London Brent crude also dipped for a fourth straight day on Friday, dropping 41 cents to settle at USD 75.11/bbl.

Crude oil prices dropped 6.6% w-o-w, the biggest weekly percentage loss since the week to July 2, on mounting concerns about slowing economic growth that have weighed on equities and oil prices. Friday's mixed data did little to alleviate the concerns as US retail sales rebounded in July but the gains were concentrated in autos and gasoline station sales and showed hints of lingering economic weakness. Consumer sentiment showed signs of improvement in August, but as with the retail sales data, there were still signs people remain nervous about the near term.

Oil prices retreated earlier in the week after jobless claims rose, highlighting a fragile US employment sector after last week's disappointing July nonfarm payrolls report, and petroleum products stockpiles pointing to anemic oil demand. In our opinion, the whole week brought a wave of negativity and Friday's data showed US consumer is still hurting.

On the currency front, the US dollar rose for its strongest weekly performance against major currencies in almost two years as a sluggish Italian debt sale and tepid US consumer data fed fears of slower growth. The euro fell to a three-week low against the dollar. Earlier on Friday, strong euro zone economic data boosted oil prices USD 1, before the rally by European stocks and the euro kicked in. Euro zone GDP rose at its fastest pace in more than three years in Q2, boosted by strong performances in Germany and France.

On the OPEC front, the cartel said in a monthly report that oil demand growth would continue to be slow in 2011, when global economic expansion is projected to be slightly lower than in 2010, leaving the current supply overhang intact. And with US crude oil inventories still bloated, OPEC members' production has been creeping higher. Members with output quotas—except Iraq—produced 26.861 mn bpd in July, 142,600 bpd more than in June.

Crude oil showed losses this morning in Asia trading after a report showed Japan’s GDP grew at the slowest pace in three quarters as global demand cooled and stimulus effects wore off. Meanwhile, the dollar traded near a 3-week high vs. the euro, reducing the investment appeal of commodities, including oil.

Going forward, we think the dollar will continue to rise against the euro and as dismal economic data keep pouring in crude futures can be expected to see more downside, with USD 70 mark likely to send a strong buy signal.