Crude declined for a second day in New York before reports that may show the U.S. economic recovering is losing strength, damping demand for fuel. Futures reversed earlier gains, falling as much as 0.5 percent, as Europe’s sovereign debt crisis caused the dollar to strengthen, undermining the appeal of dollar-priced assets such as crude. U.S. reports may say manufacturing shrank in August for the first time in two years while employment growth slowed. China’s Purchasing Managers’ Index rose in August from a 29- month low, according to data published today. “The economic soft patch looks as if it will last longer than we had thought, but I am not convinced it will end in recession,” said Thorbjoern Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, who predicts Brent will average $107 in the fourth quarter. Oil for October delivery on the New York Mercantile Exchange fell as much as 46 cents to $88.35 a barrel and was at $88.49 at 9:51 a.m. London time. Futures fell 7.2 percent in August, their biggest monthly loss since May, and are down 3.2 percent this year. Brent crude for October settlement fell 80 cents to $114.05 a barrel on the ICE Futures Europe exchange in London, snapping a seven-day streak of advances. The European benchmark contract was at a premium of $25.56 to U.S. futures, compared with a record close of $26.21 on Aug. 19. U.S. Manufacturing Slows The U.S. Institute for Supply Management’s manufacturing index fell to 48.5 last month from 50.9 in July, according to the median estimate of 80 economists surveyed by Bloomberg News before today’s data. The dividing line between expansion and contraction is 50, a level that the gauge last fell below in July 2009. Tomorrow’s Labor Department report may show growth in nonfarm payrolls slowed to 70,000 from 117,000. ADP Employer Services said yesterday that U.S. companies added 91,000 workers to payrolls in August, the fewest in three months, according to data from ADP Employer Services. China’s PMI rose to 50.9 last month from a 29-month low of 50.7 in July, the China Federation of Logistics and Purchasing said today. A separate index by HSBC Holdings Plc and Markit Economics was 49.9, compared with 49.3 the prior month. A reading of 50 is the borderline between expansion and contraction. Gulf Storm System A system of clouds and thunderstorms over the southeastern Gulf of Mexico has a 60 percent chance of becoming a tropical cyclone in the next two days, the National Hurricane Center said in an outlook before 8 p.m. East Coast time yesterday. “Interests along the entire northern Gulf of Mexico coast should monitor the progress of this disturbance,” the center said in its outlook. Katia became the second Atlantic hurricane this year, according to an NHC advisory at 11 p.m. New York time yesterday. Katia, rated category one, was about 1,165 miles (1,875 kilometers) east of the Leeward Islands with winds of 75 miles per hour and moving west-northwest at 20 mph, the advisory said. The storm may reach waters north of Puerto Rico by Sept. 4, the Miami-based center said. While the storm is forecast to turn out to sea eventually, a shift westward could bring it to land in eastern Canada, according to private forecaster AccuWeather. Canada’s Atlantic region, a major gasoline supplier for the Northeast, exported 469,704 cubic meters (2.96 million barrels) of the fuel in May. To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: John Buckley at johnbuckley@bloomberg.net

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