SINGAPORE: Oil prices fell to near US$78 a barrel Friday in Asia as the region's stock markets dropped on dour economic figures from Japan ahead of a key U.S. growth report.

Benchmark crude for September delivery was down 24 cents to $78.12 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.37 to settle at $78.36 on Thursday.

All major Asian stock markets were lower after the Dow Jones industrial average dropped 0.3 percent Thursday and Japan reported a higher jobless rate, falling consumer prices and lower industrial production.

Oil traders often look to stock markets as a barometer of overall investor sentiment.

Investors are cautious ahead of the second-quarter U.S. economic growth number, due to be announced later Friday. Analysts expects GDP expanded about 2.5 percent in the April-to-June quarter, down from 2.7 percent in the first quarter.

Some analysts expect the global economy to slow in the second half, undermining demand for oil.

"The global recovery heading into slow motion will leave the market well supplied, subsequently putting downside pressure on prices," Saxo Capital said in a report.

Saxo expects prices to fall to $60 at the end of the year, "barring geopolitics or devastating hurricane."

In other Nymex trading in August contracts, heating oil fell 0.42 cent to $2.0330 a gallon, gasoline was steady at $2.0974 a gallon and natural gas rose 2.7 cents to 4.854 per 1,000 cubic feet.

Brent crude was down 18 cents to $77.41 a barrel on the ICE futures exchange. - AP

Earlier report

Oil prices rise on better corporate earnings

NEW YORK: Oil prices rose Thursday as better-than-expected earnings from Exxon Mobil Corp., Southwest Airlines Co. and others bolstered hope for an improving economy.

Benchmark crude for September delivery rose $1.37 to settle at $78.36 a barrel on the New York Mercantile Exchange.

Oil also benefited from a slight decline in new unemployment claims and a weaker dollar.

Commodities like oil are priced in dollars.

A weaker dollar makes commodities more attractive to buyers holding foreign currency.

Oil traders have been closely watching the movement of the dollar, stock markets, earnings and economic data for clues about investor sentiment and the strength of the U.S. and global economies.

In a research report Barclays Capital said the main driver of oil prices has been skittishness about the economic recovery.

"It may take a while before the ghosts from the previous crisis go away entirely," it wrote.

Exxon Mobil Corp.'s second-quarter income nearly doubled to $7.56 billion as oil prices increased from last year.

It was Exxon's highest quarterly profit since the $7.82 billion it earned in the last three months of 2008.

Southwest Airlines reported second-quarter earnings of $112 million. It credited a 21 percent increase in revenue to higher average fares.

In other energy trading, natural gas rose as the government said reserves grew by 28 billion cubic feet to 2.919 trillion cubic feet last week.

Supplies remain about 9 percent above the five-year average.

Analysts said reserves typically rise more this time of year.

A heat wave that has Americans turning on air conditioners is forcing power companies to burn more gas to generate electricity.

Reduced production in the Gulf of Mexico last week due to Tropical Storm Bonnie also slowed the expansion of natural gas reserves.

Natural gas for September delivery rose 10.9 cents to $4.827 per 1,000 cubic feet.

In other Nymex trading, heating oil for August delivery added 4.08 cents to $2.0372 a gallon.

Because that contract expires on Friday, much of the trading has moved to the September contract, where the price gained 4.36 cents at $2.0696 a gallon.

The August contract for gasoline, which also expires Friday, rose 3.4 cents to $2.0974 a gallon.

The September contract rose 3.63 cents to $2.1010 a gallon.

Brent crude settled up 31 cents at $77.59 a barrel on the ICE futures exchange. - AP

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