Oil Falls on Weak U.S. Data

NEW YORK, Sept. 5 -- Crude oil prices fell on Tuesday as weak U.S. data clouded the demand outlook, offsetting the support from hopes for major central banks' stimulus plans.

The U.S. Institute of Supply Management's manufacturing index fell for the third consecutive month in August to 49.6 from 49.8 in July. This was the lowest reading since July 2009, with new orders, production and employment indexes all falling. The shrinking manufacturing sector triggered worries that the U.S. economic recovery was losing steam, which would mean less oil demand.

A separate report from the Commerce Department showed that U.S. construction spending dropped unexpectedly by 0.9 percent in July as private and public building activities both declined.

The struggling U.S. housing market added pressure to oil prices.

The European Central Bank (ECB) was scheduled to meet on Thursday and work on the details of its new plan to tackle the region's debt crisis. Analysts were expecting another round of bond purchases in the secondary market aimed at curbing the borrowing costs for debt-burdened countries like Italy and Spain.

Hopes for the ECB bond buying soared on Monday after ECB President Mario Draghi said that short-term sovereign bond purchases would not breach the European Union's rules.

Meanwhile, the U.S. Federal Reserve was also expected to announce more easing policies at its September meeting after Chairman Ben Bernanke's Jackson Hole speech raised new hopes among investors.

Light, sweet crude for October delivery dropped 1.17 dollars, or 1.23 percent, to settle at 95.30 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude for October delivery also declined 1.60 dollars, or 1.38 percent, to close at 114.18 dollars a barrel.