BLBG:Oil Extends Biggest Drop in Two Weeks on Jobs, Supplies
Oil fell, extending the biggest decline in two weeks, as worse-than-forecast employment data underscored weakness in the global economy and U.S. crude stockpiles increased to the highest level in 21 years.
Futures slipped as much as 0.5 percent in New York after falling 0.9 percent yesterday. Prices dropped as data showed U.S. employers added fewer jobs than predicted last month while unemployment in Germany unexpectedly increased. Crude supplies in the U.S., the world’s biggest consumer of the commodity, rose to the most since September 1990, according to a report from the Energy Information Administration. Fuel stockpiles fell more than analysts projected in a Bloomberg News survey.
“We are still suffering from yesterday’s data,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said in a telephone interview. “Unemployment numbers from Europe were very disappointing and the U.S. job numbers did their part in bringing oil prices down. The supply-demand situation is quite stable at the moment.”
Crude for June delivery was at $104.70 a barrel, down 52 cents, on the New York Mercantile Exchange at 10:23 a.m. London time. The contract yesterday slid 94 cents, the most since April 18, to $105.22. Front-month oil has risen 6 percent this year.
Brent oil for June settlement was at $117.70 a barrel, down 50 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $13. The spread dropped to $12.98 yesterday, the smallest closing level in more than three months.
U.S. Stockpiles
“Interesting to see that the Brent-WTI spread narrowed overnight given that Cushing stocks increased to fresh record highs,” said Richard Gorry, an analyst with JBC Energy GmbH in Singapore. “It has been our view for some time, that as we see more pipeline capacity coming online from Cushing to the U.S. Gulf Coast, the spread will come under substantial pressure.”
U.S. crude stockpiles rose 2.8 million barrels last week to 375.9 million, the EIA report showed. They were forecast to climb 2.5 million barrels, according to a Bloomberg News survey.
Inventories at Cushing, Oklahoma, the delivery point for the New York oil contract, rose 1.21 million barrels to a record 43 million, the report showed. Stockpiles at the hub have climbed 13 of the last 15 weeks.
Gasoline supplies dropped 2 million barrels. They were projected to fall 1.5 million barrels, according to the median estimate of 11 analysts in the Bloomberg survey. Distillate stockpiles, a category that includes heating oil and diesel, slid 1.9 million barrels compared with an expected 350,000 barrel decline, according to the EIA.
U.S. Employment
Private employment in the U.S. increased by 119,000 in April, the smallest gain in seven months, after rising by 201,000 in March, ADP Employer Services said yesterday. The median forecast of economists surveyed by Bloomberg News called for a 170,000 increase.
German unemployment unexpectedly rose in April. The number of people out of work increased a seasonally-adjusted 19,000 to 2.87 million, the Nuremberg-based Federal Labor Agency said. Economists had forecast a decline of 10,000. New Zealand’s jobless rate climbed to the highest level since 2010.
“Disappointing economic data from Europe and the U.S. suggested a potential slowdown in the recovery process,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. (ANZ) in Melbourne, said in a note today. “U.S. crude prices didn’t respond as bearishly as we would have expected to the additional negative data that showed yet another rise in EIA crude stocks, perhaps already having priced-in a softer demand outlook a couple weeks ago.”
‘Slight Loosening’
The oil market showed some “slight loosening” during the first quarter, though it is too early to be completely sure that supply conditions have improved, Maria van der Hoeven, the executive director of the International Energy Agency, said.
The agency, an adviser to 28 industrialized nations, is ready to act if a major disruption to supplies occur, she said at the International Oil Summit in Paris today. The IEA coordinated the release of 60 million barrels of crude and oil products last June after Libyan output was disrupted by an armed uprising against Muammar Qaddafi.
Technical indicators showed investors may be unsure of the direction for short-term prices. Futures yesterday traded within the previous day’s range, creating a consolidation pattern known as an “inside day,” according to data compiled by Bloomberg. Crude has technical support along the middle Bollinger Band, around $103.36 a barrel today.
To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
