BLBG: Crude Oil Pares Third Annual Increase as Manufacturing in China Contracts
Oil fell, paring a third annual increase, as Chinese manufacturing contracted for a second month in December, spurring concern that demand from the world’s second-largest crude-consuming country may slow.
Futures dropped as much as 1 percent after HSBC Holdings Plc and Markit Economics also reported China’s exports (CNFREXPY) declined for the first time in three months as Europe’s debt crisis cut orders. Oil advanced in 2011 as the collapse of Libyan exports reduced supply, U.S. stimulus measures revived the economy and consumption by emerging countries rose.
“The negative data out of China as well as general European concern may put some pressure on crude,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “Volume is very light and it doesn’t take a lot to move this market around.”
Crude for February delivery slid 22 cents, or 0.2 percent, to $99.43 a barrel at 11:17 a.m. on the New York Mercantile Exchange. It has advanced 8.8 percent this year. Prices have fallen 0.3 percent this week and 0.9 percent in December.
Brent for February settlement dropped 38 cents, or 0.4 percent, to $107.63 a barrel on the London-based ICE Futures Europe Exchange, headed for a 14 percent increase this year.
Exchanges in New York and London will be closed Jan. 2 to observe the New Year’s Day holiday.
The Chinese purchasing managers’ index was at 48.7 in December, up from 47.7 in November, according to HSBC and Markit. A reading below 50 indicates a contraction.
Chinese Slowdown
A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of Europe’s austerity measures. China used 9.06 million barrels a day of oil in 2010, or 10 percent of world’s total consumption, according to the BP Statistical Review of World Energy.
Crude surged to the highest level in more than two years in May, trading at $114.83 in New York after a popular uprising in Tunisia sparked similar protests across the Middle East and North Africa. Clashes in Libya between rebels and forces loyal to then-leader Muammar Qaddafi cut off more than 1.5 million barrels a day of oil exports from the country.
An improving economic outlook in the U.S., the world’s biggest oil consumer, also helped oil, even as Europe’s debt crisis threatens to plunge the region into recession.
“The U.S. economy is getting back slightly and that’s kind of supporting the market,” said Chris Dillman, an analyst and broker at Tradition Energy in Stamford, Connecticut.
U.S. Economy
The U.S. unemployment rate fell to 8.6 percent in November, the lowest level since March 2009, after lingering at 9 percent or above for seven straight months.
“The economic recovery and geopolitical concern are pushing up oil,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “The U.S. is still the world’s biggest oil consumer.”
Oil prices may rise next week amid geopolitical tension in the Middle East, a Bloomberg News survey showed. Thirteen of 32 analysts, or 41 percent, forecast crude will increase through Jan. 6. Iran threatened this week to block the Strait of Hormuz if sanctions are imposed on its crude exports. It also faces a possible boycott by European buyers.
Iran’s threat to shut the strait is “irrational behavior,” Victoria Nuland, a U.S. State Department spokeswoman in Washington, said yesterday. About a sixth of global crude supply travels through the seaway.
“The geopolitical risk premium will support higher prices at the outset of 2012,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “I expect prices to increase at the start of next week as the tension increases in the world’s most vital oil-producing area.”
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
