08/01/2011 02:00 EDT | Updated 09/30/2011 05:12 EDT

Weak manufacturing reports pull oil lower

NEW YORK, N.Y. - Oil fell from its early high Monday, as a series of weak readings on the U.S. and global economy rattled energy markets and offset enthusiasm over a debt deal agreement in Washington.

Benchmark West Texas Intermediate crude for September delivery fell $1.52 to $94.18 per barrel in midday trading on the New York Mercantile Exchange. It was as high as $98.60 earlier in the session. Brent crude, which is used to price many international oil varieties, lost 15 cents at $116.60 per barrel on the ICE Futures exchange in London.

Oil, which usually moves with global markets, climbed early in the day after U.S. lawmakers came up with a last-minute deal to raise the nation's debt ceiling and avoid default.

"It looks like we dodged a bullet," said Michael Lynch, president of Strategic Energy & Economic Research. "The question long-term, though, is what's going on with the economy."

The government may continue to pay its bills, but the economy is still sluggish. The government said last week that the economy grew just 1.3 per cent from April to June, new economic reports from both the U.S. and China were not encouraging.

The Institute for Supply Management said manufacturing activity in the U.S. barely grew in July. While it's expanded for 23 straight months, the July reading was the lowest since July 2009 — a month after the recession officially ended.

That followed a report on Sunday that China's manufacturing sector slowed. HSBC's purchasing managers' index for China fell to its lowest level in 16 months.

Independent oil analyst Jim Ritterbusch said the debt deal doesn't appear to be "conducive toward economic growth." He said sluggish oil demand will be a rising concern "once the initial hoopla of the debt ceiling deal subsides."

Gasoline pump prices were virtually unchanged on Monday at a national average $3.705 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 16.4 cents higher than it was at the beginning of June, and it's about 97 cents more than the same time last year.