Oil slipped, heading for its first weekly decline in New York in a month, amid concern that this year’s rally in prices is stoking inflation and starting to erode fuel demand. Futures pared earlier gains after Chinese data showed that inflation in the world’s biggest energy user accelerated in March to the fastest pace since 2008. Total U.S. crude inventories rose 1.63 million barrels to 359.3 million last week as refiners slowed processing rates, the Energy Department said on April 13. The North Atlantic Treaty Organization’s chief said the alliance needs more attack jets to target Libyan ground forces as Qaddafi’s troops continue their attacks. “Crude oil prices have pushed ahead of where fundamentals currently suggest,” analysts at Goldman Sachs Group Inc. led by Jeffrey Currie in London wrote in a report today. “The near- term downside risk to prices has risen in recent weeks” on “nascent signs of demand destruction in the United States.” Crude for May delivery was at $107.64 a barrel, down 47 cents, at 10:59 a.m. London time in electronic trading on the New York Mercantile Exchange. Yesterday, the contract increased $1, or 0.9 percent, to settle at $108.11, the highest close since March 11. Prices are up 27 percent from a year ago and headed for a weekly decline of 4.6 percent. Brent oil for June settlement slid 27 cents, or 0.2 percent, to $121.73 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it fell 33 cents to $122. China’s GDP, Inflation China’s economy grew 9.7 percent in the first quarter while consumer prices rose 5.4 percent from a year earlier, the statistics bureau said at a briefing in Beijing today. The median forecasts in Bloomberg News surveys of economists were for growth of 9.4 percent and inflation of 5.2 percent. Industrial output increased 14.8 percent year-on-year, exceeding estimates of 14 percent. “The Chinese data is both bullish and bearish for commodities,” said Tetsu Emori, a commodity fund manager with Astmax Ltd. in Tokyo. “It’s a difficult situation for the Chinese government. They would like to sustain the economic growth for as long as possible, but they have to control consumer prices.” Taming prices is the government’s top and “urgent” priority, China’s cabinet said after meeting in Beijing this week to review the performance of the world’s second-biggest economy. Officials aim to hold full-year inflation at 4 percent. Brent Premium “We still expect oil prices to march higher because there is a strong correlation historically between China’s industrial output growth and oil prices,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities in Hong Kong. “We expect Brent prices to test $130 a barrel next week, also because of escalating tensions in Libya and because European refineries are coming back from maintenance.” May futures for the European benchmark traded at a premium of $14.25 a barrel to U.S. futures yesterday. June contracts for Brent and WTI were at a difference of $13.52 a barrel today. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the delivery point for New York futures. The spread averaged 76 cents last year. “The physical costs of shipping crude from Cushing to western Europe should stop the spread from getting too wide,” Stephen Schork, president of the Villanova, Pennsylvania-based consultant Schork Group Inc., said today in a report, referring to the potential to ship arbitrage cargoes from the U.S. NATO’s Libya Campaign The limitations of the NATO’s air campaign have become evident as forces loyal to Qaddafi stepped up their assault in Misrata, Libya’s third-largest city, and pressed their attack on rebels near the oil port city of Brega. The rebels said 47 were killed in Misrata yesterday by regime shelling, al-Jazeera reported. Only five NATO nations, led by France and the U.K, are known to be targeting Qaddafi’s ground forces. “This is very much unlike what happened in Iraq,” said Mirae’s Kwan. “This looks like a multiyear, see-saw military event that will push oil prices higher.” The conflict in Libya is the bloodiest in a wave of uprisings that has toppled leaders in Egypt and Tunisia and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen. Crude oil prices may increase on speculation unrest in the Middle East will curb exports as Saudi Arabia reduces production, a Bloomberg News survey showed. Fifteen of 33 analysts, or 45 percent, forecast crude oil will increase through April 21. Last week, 49 percent of respondents said futures would gain. Saudi Arabia, the biggest oil producer in the Organization of Petroleum Exporting Countries, pumped 9 million barrels of crude a day in March, the highest level since October 2008, according to data compiled by Bloomberg News. It developed two blends to offset the shortfall in Libya. The country reduced its crude oil output in April by 300,000 barrels a day, John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi, said yesterday in a telephone interview. To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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