Oil Drops Below $70 Amid Slow Demand Recovery

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". . .there's nothing on the fundamental side that would suggest prices would be this high."

Oil fell below $70 a barrel and gasoline declined on signs U.S. demand will be slow to rebound after a report yesterday showed crude supplies unexpectedly rose in the world's largest energy-consuming country.

Oil prices dropped as much as 2.2% to their lowest level in a week after the Energy Department said crude stockpiles rose 128,000 barrels last week, compared with forecasts for a 1.15 million-barrel reduction. U.S. jobless claims increased more than estimated. They peaked in April in the midst of the worst recession since the Great Depression.

"We're not seeing anything to suggest demand is recovering, so there's nothing on the fundamental side that would suggest prices would be this high," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis. Oil's inability to break through technical resistance at $75 a barrel is also pressuring the market, he said.

Crude oil for October delivery fell $1.29, or 1.8%, to $70.14 a barrel at 10:49 a.m. on the New York Mercantile Exchange. Earlier, oil declined to $69.83, the lowest level since Aug. 19 on an intraday basis. Crude reached $75 a barrel on Aug. 25. Futures have gained 57% this year.

U.S. applications for jobless benefits slipped by 10,000 to 570,000 in the week ended Aug. 22 from a revised 580,000 the week before, according to Labor Department data released today in Washington. Economists forecast claims would drop to 565,000 from a previously reported 576,000, according to the median of 41 projections in a Bloomberg News survey.

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