BLBG: Oil Falls to Lowest in Week as Manufacturing Slows; U.S. Supplies Increase
Oil dropped to its lowest in a week after reports showed U.S. crude supplies rose, companies added fewer jobs than forecast and global manufacturing slowed, stoking speculation fuel demand may falter.
Crude stockpiles climbed the most in more than a month, according to the American Petroleum Institute. The Energy Department’s data due today are also forecast by analysts to show an increase. Employment rose by 38,000 in May, the smallest gain since September, ADP Employer Services said. Manufacturing in China, Europe and the U.S. slowed in May. The Organization of Petroleum Exporting Countries is likely to keep production levels steady when it meets next week, according to a Bloomberg survey.
“The bad news raised a few major question marks over the path of the world’s largest economy,” analysts led by Johannes Benigni at consultant JBC Energy GmbH in Vienna said in a report. “Increasing signals of a slowdown have also been observed in physical crude markets recently.”
Crude for July delivery lost as much as $1.04 to $99.25 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.73 at 9:25 a.m. London time. The contract yesterday declined $2.41, or 2.4 percent, to $100.29, the biggest drop since May 11. Prices are up 37 percent in the past year.
Brent crude oil for July delivery was at $114.15 a barrel, down 38 cents, on the London-based ICE Futures Europe exchange. The contract yesterday fell $2.20, or 1.9 percent, to $114.53, the lowest settlement since May 24.
Crude Inventories
The European benchmark contract traded at a premium of $14.53 a barrel to U.S. futures. The difference between front- month contracts in London and New York reached a record $19.54 on Feb. 21. It averaged 76 cents last year.
The industry-funded American Petroleum Institute said U.S. crude supplies rose 3.5 million barrels last week to 371.6 million. An Energy Department report at 11 a.m. in Washington is forecast to show stockpiles declined 1.6 million barrels, according to the median of 13 analyst estimates in a Bloomberg News survey.
Gasoline inventories climbed 1.5 million barrels to 212.7 million, the API said. The Energy Department report may show a 900,000 barrel increase for the fuel, the survey shows.
“The American Petroleum Institute crude inventory data looked negative, with a surprising rise in crude and gasoline stockpiles,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. If Energy Department data “confirms today’s bearish numbers, prices could remain under pressure.”
Oil Imports
Oil-supply totals from the API and the Energy Department have moved in the same direction 72 percent of the time over the past year. API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
The U.S. Institute for Supply Management’s factory index fell more than projected to 53.5 last month, the lowest level since September 2009, from 60.4 in April, the Tempe, Arizona- based group said yesterday. Economists forecast the gauge would drop to 57.1, according to a Bloomberg News survey.
Separately, a purchasing managers’ index for China yesterday showed the slowest expansionary pace in nine months, while the equivalent measure for the euro area fell to a seven- month low. Russia’s index signaled “near stagnation,” and reports from Poland to Hungary also showed a loss of manufacturing momentum.
The Organization of Petroleum Exporting Countries’ crude production increased for a second straight month in May, led by gains from Saudi Arabia and Nigeria, according to a Bloomberg News survey.
OPEC Surveys
Output rose 165,000 barrels, or 0.6 percent, to average 28.895 million barrels a day, according to the survey of oil companies, producers and analysts. Saudi Arabia bolstered output by 75,000 barrels, or 0.8 percent, to 8.925 million barrels a day, the highest level since October 2008. Nigerian production rose 75,000 barrels a day to 2.06 million last month.
The group won’t announce any supply increase and will keep its formal quota unchanged for an eighth consecutive meeting at its June 8 gathering, 27 of 30 analysts said.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
