BLBG:Oil Slides After Biggest Gain In Five Weeks; Ernesto Heads West
Oil slid from the highest close in two weeks in New York amid speculation that its biggest gain in more than a month was excessive. Tropical Storm Ernesto headed westward in the Caribbean after weakening.
Futures slipped as much as 0.5 percent after surging 4.9 percent on Aug. 3, the most since June 29. Oil’s advance halted after reaching a technical resistance level. Prices finished last week with a gain of 1.4 percent after U.S. payrolls rose more than estimated and service industries expanded at a faster pace. Ernesto, located about 235 miles east of the Nicaragua and Honduras border, had winds of about 50 mph, down from 60 mph on Aug. 4, according to the U.S. National Hurricane Center.
“The previous peak of around $93 for West Texas looms as a bit of a psychological resistance level for the market,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. The weakening of tropical storm Ernesto “takes away a potential supply disruption,” he said.
Oil for September delivery slid as much as 45 cents to $90.95 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.10 at 1:48 p.m. Sydney time. It surged $4.27 to $91.40 on Aug. 3, the highest settlement since July 20. Prices are 7.8 percent lower this year.
Brent crude for September settlement fell 49 cents, or 0.5 percent, to $108.45 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $17.34 from $17.54 on Aug. 3.
Technical Resistance
WTI is retreating after reaching technical resistance around $91.85 a barrel, data compiled by Bloomberg shows. That’s the higher of two so-called leading span lines that define an “ichimoku cloud,” an area where buy orders tend to be clustered. Futures halted their gain near this line on Aug. 3.
Hedge funds reduced bullish oil bets for the first time in three weeks before reports showing U.S. economic growth sent crude to its biggest gain since June. Money managers cut net- long positions by 2.6 percent in the seven days ended July 31, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 3. Wagers have dropped 50 percent from a 2012 high on Feb. 28.
Oil futures rose on Aug. 3 after Labor Department data showed payrolls gained 163,000 in July compared with a forecast for a 100,000 increase by economists surveyed by Bloomberg News. The Institute for Supply Management’s non-manufacturing index unexpectedly climbed.
Sudan Agreement
Ernesto was moving west at 15 mph, the Miami- based center said in a web advisory at 11 p.m. local time yesterday. Some strengthening is forecast as it moves over the northwestern Caribbean Sea on today and tomorrow, according to the advisory. The center of Ernesto is forecast to pass to the south of the Cayman Islands tonight.
U.S. President Barack Obama welcomed the announcement of an oil revenue agreement between Sudan and South Sudan, according to a statement from the White House on Aug. 4. South Sudan agreed to pay about $9.48 a barrel to transport its fuel through Sudan’s pipelines, according to Associated Press, which cited a statement from the South Sudan’s government.
The dispute over oil-transit fees had shut down oil production in South Sudan and brought the two countries to the brink of war in April.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
