Oil prices slipped on Thursday as weaker-than-expected US manufacturing data and rising jobless claims dampened hopes of a demand rebound in the world's top energy consumer. The US manufacturing sector expanded in September, but missed analyst expectations, according a report from the Institute for Supply Management. "I really think the key was the manufacturing number... in spite of the fact that the consumer spending number was good," said Phil Flynn, PFGBest Research in Chicago.
A US Labour Department report showed the number of US workers seeking jobless benefits climbed last week. The bleak economic data outweighed data showing that US personal spending rose 1.3 percent in August in the largest gain since October 2001.
US crude futures fell 49 cents to $70.12 a barrel by 2:00 pm EDT (1800 GMT). The previous session saw a rise of nearly $4, the biggest daily jump in dollar terms since April. London Brent crude dropped 50 cents to $68.57 a barrel. A rare bilateral meeting between Western leaders and Iran in Geneva on Thursday may have also helped to ease oil prices.
"This meeting is a good opportunity for fresh co-operation to remove international concerns," Tehran's chief nuclear negotiator Saeed Jalili said Thursday. Iran's tensions with the West over the Opec member's nuclear program have been a bullish factor in oil markets in recent years. The dip in oil prices followed a rally on Wednesday, which was spurred by data showing a drop in US gasoline inventories - a signal of increasing demand.
But analysts said it was too soon to talk of a strong upturn in demand and some expected prices to correct lower. "Aspects of the weekly petroleum report were supportive, at least relative to expectations, but the data was really a mixed affair," said Citi analyst Tim Evans in a research note.
"To our eye, the rally looks very much overdone, with hot money simply chasing the price dynamically higher," he said. Data from the US government Energy Information Agency (EIA) showed a 1.6 million-barrel drop in gasoline stocks for the week ended September 25. Distillates increased by 300,000 barrels to a 26-year high of 171.1 million, coming ahead of winter demand.