Oil futures crept lower Thursday, weighed down by a disappointing reading on U.S. jobless claims that raised worries about the economy of the world's biggest oil consumer.
Gasoline futures, meanwhile, sank to their lowest level since February, raising the possibility that consumers could get some relief at the pump this summer.
"Today's rapid decline to lowest levels in more than two months suggests to us that...this sharp price selloff could prove sustainable into next month," said Jim Ritterbusch, head of the trading advisory firm Ritterbusch & Associates, of the drop in gasoline prices.
Initial jobless claims fell by 2,000 to 386,000 last week, while the four-week moving average of claims rose by 5,500 to a seasonally adjusted 374,750, the highest number of claims since Jan. 28, according to the Labor Department.
Oil market participants monitor U.S. jobless claims and other employment measures because they offer a window into the economic health of the world's biggest oil consumer. Jobless rates are closely correlated with oil demand.
Light, sweet crude for May delivery settled 40 cents, or 0.4%, lower at $102.27 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently gained 3 cents to $118.00 a barrel.
Front-month May reformulated gasoline blendstock, or RBOB, settled 4.86 cents, or 1.5%, lower at $3.1541 a gallon, its lowest level since Feb. 29.
The overall employment picture in the U.S. has been improving for months, offering hope that the U.S. has emerged from the worst of the slump. The gradually improving data--as well as other factors--have helped buoy crude prices, keeping the Nymex contract above $100 a barrel for much of this year.
But the pace of improvement has slowed recently. In March, U.S. employers added 120,000 nonfarm jobs, half of what they added in the previous month.
At the same time, oil prices have eased from their recent highs. Nymex crude hit a recent peak near $110 a barrel in February, before pulling back in recent weeks.
"The unemployment claims were a little bit bigger than expected," said Peter Donovan, vice president at Vantage Trading in New York.
Crude prices had been in firmly positive territory overnight after a successful bond auction by Spain. Investors have been keeping a close eye on the ongoing debt problems in the euro zone, which have dented demand for crude oil in Europe and raised fears of a broader economic crisis.
In the auction, Spain sold EUR2.54 billion in bonds, just above the upper end of the target range. However, the Spanish Treasury confirmed it paid a higher yield on the 10-year bond than previously. And the relief was tempered by the small size of the auction.
May heating oil settled up 0.69 cent, or 0.2%, to $3.1251 a gallon.