(Bloomberg News) Oil fell for the first time in three days as applications for unemployment benefits last week hovered near the highest level of the year, indicating there hasn't been an increase in commuters using fuel.
Prices dropped as much as 2.5 percent after the Labor Department reported jobless claims of 386,000 in the week ended June 23 and revised up the previous week's figure. Oil extended losses as the Supreme Court upheld the core of President Barack Obama's health-care overhaul, saying Congress has the power to make Americans carry insurance or pay a penalty.
"The jobless claims number was clearly a negative for the market and obviously the revision to the prior week was very disturbing," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. The health- care ruling is being "viewed in the market as an anti-growth story, which is helping to pressure energy."
Crude for August delivery declined $1.61, or 2 percent, to $78.60 a barrel at 11:37 a.m. on the New York Mercantile Exchange. Prices have fallen 24 percent this quarter, heading for the biggest drop since the final three months of 2008.
Brent oil for August settlement decreased $1.43, or 1.5 percent, to $92.07 a barrel on the London-based ICE Futures Europe exchange. It has retreated 25 percent since March 30.
Brent is set to recover from its worst quarter since 2008 as a European Union ban on Iranian oil takes effect, central banks act to protect growth and on speculation OPEC will curb some of its excess supply.
"The economic recovery's kind of stalled here in the U.S.," said said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. "It doesn't seem that our economic problems are really gone."
Jobless claims declined by 6,000 in the Labor Department report. The prior week's reading was revised up to 392,000 from 387,000, matching an April figure as the steepest of 2012. The four-week moving average decreased to 386,750 from 387,500, which was the highest since the week ended Dec. 3.
The U.S. economy grew 1.9 percent in the first quarter, reflecting a gain in consumer spending that now shows signs of cooling as the labor market weakens, Commerce Department figures showed today. The government's gross domestic product estimate is the third and final for the first quarter and follows a 3 percent increase in the prior quarter.
Crude retreated as equities snapped a two-day rally in the Standard & Poor's 500 Index after JPMorgan Chase & Co. tumbled on a report that the lender's trading losses from credit derivatives may total as much as $9 billion.
The S&P 500 and the Dow Jones Industrial Average each dropped as much as 1.3 percent.
Futures also fell as economic confidence in the euro area slumped to the lowest level in more than 2 1/2 years in June and German unemployment increased more than economists forecast ahead of a two-day summit of the region's leaders.
"The economic numbers are not turning around to show anything good and the problems in Europe are not getting better," said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. "The fundamentals are still bearish for oil."
Euro-area finance ministers set the stage for today's gathering in Brussels of the EU's 27 chiefs, approving Cyprus's bailout and detailing how they would aid Spanish banks. Consensus breaks down on safeguarding governments in Spain and Italy, with German Chancellor Angela Merkel rejecting calls to do more to cut their borrowing costs.
"The market is waiting to see what the Europeans are going to do," McGillian said. Spain and Italy "are the dark clouds on the horizon right now."
Oil consumption in Europe will decline both this year and next, and slower growth in China could also curb demand, the U.S. Energy Department said June 12 in its Short-Term Energy Outlook. Oil demand in the U.S., the world's largest consumer, will drop for a second year in 2012, the department said.