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Oil down near $103, eyes worst month in 2 yrs

Brent crude futures for July delivery were down 31 cents at $103.16 per barrel by 1255 GMT, after hitting a new five-month low at $102.78. Prices were on track for a monthly loss of around 13 percent, the biggest since May 2010, after slipping 3 percent on Thursday.

US crude for July delivery was down 37 cents to $87.45 per barrel. Prices were headed for a steep monthly loss of around 16 percent - the worst since late 2008.

Oil prices came under fresh pressure after US first quarter GDP growth was revised down to 1.9 percent from last month’s 2.2 percent estimate. Jobless claims also rose for the fourth straight week.

“The market is in a state of flux right now, driven by currencies and safe haven flights,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Traders and analysts said the oil price could stabilise around current levels, as it is down at levels where it has found support before.

“So much of the bearish news has been priced in there’s a chance of a little bit of a recovery,” said Christopher Bellew, a trader at Jefferies Bache in London. “It is technically over-sold - all the funds have got out.”

Hansen saw US crude finding support down towards $85 and ahead of $100 for Brent, as this is a crucial level from a technical point of view and given repeated statements by the Saudis. “We are pretty close to a good support here,” he said.

“We’ve completely removed the geopolitical risk factor and now the demand side has come back into focus. There is some nervousness we could see a deeper slowdown than what was expected.”

He pointed to the poor economic performance data out of India, which has been one of the growth engines for energy consumption. India’s annual economic growth slumped in the first quarter to a nine-year low of 5.3 percent as the manufacturing sector shrank.

Eurozone crisis

The crisis in the eurozone also continues to dominate market sentiment. “Markets have been fairly tight but it’s all these eurozone worries that have really spooked the oil markets,” said Rob Montefusco, a trader at Sucden Financial.

“Everyone hoped there would be some sort of solution but it has just got worse and worse. There is no reason for oil to push back up to the heights we had before given that we’re definitely expecting a slowdown.”

Mario Draghi, president of the European Central Bank, warned on Thursday that the ECB could not fill the vacuum created by the lack of action by national governments.

Spain’s centre-right government has so far failed to spell out how it plans to finance a 23.5 billion euro ($29 billion) rescue of Bankia, the country’s fourth-biggest lender.

This is unnerving markets and has driven the country’s borrowing costs to levels at which Ireland and Portugal sought international bailouts.

“The situation in Spain at the moment is untenable, not only is there concern over the state of its banking sector but there is little confidence its government will actually be able to bail them out,” said Michael Creed, an economist at the National Australia Bank.

This is keeping investors on the sidelines. Adding to the nervousness in markets is the fact that the outcome of the Greek election remains finely balanced, as different polls in recent days have produced highly contradictory results.