Oil prices rallied early this week with US crude topping US$84 per barrel on Wednesday, driven by optimism that EU policymakers will soon agree on a plan to tackle Europe’s debt problems.

However, futures for crude oil in London and New York fell sharply after Friday’s economic data dampened confidence in the strength of the economic recovery in the US and reinforced concerns that China’s economic growth may be slowing faster than thought.

This week’s update on the HSBC China PMI index showed no change in September from 49.9 in August, marking the third straight month of contraction in China’s manufacturing sector. A reading of below 50 indicates a decline in manufacturing activity in the world’s second largest energy consumer.

Meanwhile, while Friday’s Chicago PMI update came in better than expected at 60.4, suggesting that business activity in one of the key industrial regions in the US expanded at a rapid pace in September, US personal income and spending data disappointed.

The Commerce Department reported that growth in personal spending slowed from 0.7 percent in July to 0.2 percent in August as incomes declined 0.1 percent, which does not bode well for gasoline demand in the US.

Oil futures faced more pressure from this week’s downbeat inventories report from the US Department of Energy. The numbers revealed a substantial buildup in US crude oil stockpiles, which added 1.9 million in the previous week, a sign that oil demand was in decline.

Meanwhile, gasoline inventories rose 800,000 barrels.

Pressured by weak mixed economic and inventories data, the price of US light, sweet crude for November delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), fell to US$79.2/barrel on Friday compared to US$79.85/barrel a week ago.

November Brent crude dropped from US$104.36/barrel to US$102.15/barrel on the ICE Exchange this week.

Major oil and gas stocks were headed in different directions this week.

BP (LON:BP.) rose from 385.05 pence to 388.5 pence over the past five days of trading, while fellow supermajor Royal Dutch Shell (LON:RDSB) declined from 2,023.5 pence to 2,012 pence.

Tullow Oil (LON:TLW) climbed from 1,296 pence to 1,309 pence and BG Group (LON:BG.) rallied from 1,162 pence to 1,241 pence.