NEW YORK — Oil fell nearly 2 percent Friday as investors grew uneasy about the U.S. economy's ability to grow significantly and the Congress' ability to act decisively to prevent a default on the nation's debt. The government said the U.S. economy expanded at a meager 1.3 percent annual rate in the second quarter after barely growing at all the first three months of the year. The data raised questions about the strength of oil demand in the months ahead. At the same time, the clock continues to tick as Congress argues about raising the government debt limit before Tuesday's deadline to avoid a default. Benchmark West Texas Intermediate crude for September delivery dropped $1.74 to settle at $95.70 per barrel on the New York Mercantile Exchange. In London, Brent crude fell 62 cents to settle at $116.74 per barrel on the ICE Futures exchange. The Commerce Department's report on GDP shows economic growth in the first six months was the weakest since the recession ended two years ago. High gas prices, job worries and a weak housing market have combined to prompt consumers to conserve money. Consumer spending increased 0.1 percent this spring, which was the smallest gain in two years. And government spending fell for the third straight quarter. That worries traders because the U.S. has the world's largest economy and slower growth could translate into waning demand for oil if businesses and consumers continue to cut back. "On a day like today where you have a disappointing GDP number, the anticipation is there will be jobs that will not be created by a certain date, there are offices that are not going to need to be cooled, heated, lighted," Cameron Hanover energy analyst Peter Beutel said. There already have been signs of declining demand. The U.S. consumed 19.1 million barrels of liquid fuels per day in the first quarter, about 21.4 percent of global oil demand of 89.1 million barrels a day, according to the Energy Department. The U.S. total included 8.6 million barrels, or 361.2 million gallons, of gasoline per day. Earlier this month, the agency estimated that gasoline consumption would rise to about 9 million barrels per day as summer driving season kicked in, but that's a less pronounced quarter-to-quarter increase than a year ago. In the four-week period ended July 22, gasoline consumption averaged nearly 9.1 million barrels per day, down by 3.3 percent from the same period last year. Demand for all oil products fell nearly 3 percent. The decline in use was "unusually bad," Beutel said. "That's a really clear sign that demand for oil products is dropping fairly severely," he said. Oil prices fell 3.9 percent this week and are up just 0.5 percent for July after rising to $99.87 on July 22. "Traders are still connecting the dots between recent evidence of economic deterioration and reduced oil demand," energy analyst Jim Ritterbusch said. "We are seeing a trend here and it's signaling a much less robust economic recovery than virtually everyone anticipated." Traders are selling contracts as they wait for a clearer picture about what may lie ahead, he said. A key part of the mix is the outcome of tense negotiations over the debt limit to avoid a possible default on government debt. Without an agreement in place by Tuesday, many analysts believe economic growth will continue to shrink. Tropical storm Don is another concern. It's moving across the central Gulf of Mexico toward southeast Texas. Traders are concerned about the potential impact the storm may have on Gulf oil operations. In other Nymex contracts for August, heating oil fell 1.5 cents to settle at $3.0994 a gallon, gasoline futures lost 0.59 cent to $3.0579 a gallon and natural gas dropped 9.9 cents to $4.145 per 1,000 cubic feet.
