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Oil prices slip after data points to cooling U.S. economy

Oil pumpjacks are viewed in the Inglewood Oil Field in Los Angeles, California.

Mario Tama | Getty Images News | Getty Images

Oil prices fell in early trade on Thursday after U.S. employment and business activity data came in weaker than expected, in signs the economy may be cooling in the world’s top oil consuming nation.

Brent crude futures were down 30 cents, or 0.34%, at $87.04 a barrel, while U.S. West Texas Intermediate crude futures fell 32 cents, or 0.38%, to $83.56 by 0030 GMT, with activity thinned by the U.S. Fourth of July holiday.

In the United States, data on Wednesday showed first-time applications for U.S. unemployment benefits increased last week, while the number of people on jobless rolls rose further to a 2-1/2-year high towards the end of June.

Separately, the ADP Employment report showed private payrolls increased by 150,000 jobs in June, below a consensus predicting an increase of 160,000, and after rising by 157,000 in May.

In a further sign of a loss of momentum in the economy, the ISM Non-Manufacturing index, a measure of U.S. services sector activity, fell to a four-year low of 48.8 in June, well below the 52.5 consensus, amid a sharp drop in orders.

However, weaker economic data may add to the Federal Reserve’s arguments to start cutting rates, analysts said, a move that would be supportive for the oil markets as lower rates could boost demand.

“The direction of recent data conforms to the Fed’s easing bias,” ANZ Research analysts said in a note. “A slowdown in growth momentum will support disinflationary impulses in coming months, paving the way for the Fed to cut rates.”

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