Oil declined for a second day in New York on speculation that a slump in Chinese imports and rising unemployment in the U.S. may indicate fuel demand will falter in the world’s biggest crude-consuming nations. Futures slipped as much as 2 percent after government reports in China showed net oil imports shrank 10 percent in June to the lowest in eight months, according to Bloomberg calculations, while inflation surged to a three-year high. A July 8 Labor Department report showed that the unemployment rate unexpectedly rose to the highest this year. European stocks fell amid concern that the region’s debt crisis will spread to Italy. “Rising risk aversion after disappointing U.S. jobs data on Friday, the Chinese data and elevated prices which need to correct” are pushing prices lower, said Carsten Fritsch, a Frankfurt-based analyst at Commerzbank AG. Crude for August delivery on the New York Mercantile Exchange fell as much as $1.88 to $94.32 a barrel, the lowest since July 5, and was at $94.62 at 1:56 p.m. London time. The contract dropped $2.47 to $96.20 on July 8. The price has risen 26 percent in the past year. Brent oil for August settlement declined $2.07, or 1.8 percent, to $116.26 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $21.64 a barrel to U.S. futures. ‘Unsustainable’ Gap “Supply issues in some North Sea facilities, growing tensions in Nigeria, and the possibility that International Energy Agency sales are being offset by less accommodative Saudi prices, is what is keeping Brent in a much firmer position versus WTI,” Edward Meir, New York-based senior commodity analyst at MF Global Inc. said today in a note. The current gap is “unsustainable” and will probably narrow, Commerzbank’s Fritsch said. He forecasts North Sea Brent crude will drop to about $110 to $115 a barrel this week, while West Texas Intermediate may fall to $92 to $93 a barrel. “We have a confluence of factors today, weak U.S. payroll data, Italian bank concerns and the Chinese trade data,” said Serene Lim, a commodity strategist with Australia & New Zealand Banking Group Ltd. in Singapore. A meeting of European Union and European Commission chiefs today was enlarged to include European Central Bank President Jean-Claude Trichet, Luxembourg Prime Minister Jean-Claude Juncker and European Economic Commissioner Olli Rehn, amid speculation Italy may be engulfed by the crisis and divisions on how to structure aid for Greece. Restrained Demand U.S. payrolls increased by 18,000 in June, the Labor Department data showed. The median estimate in a Bloomberg News survey called for a gain of 105,000. The jobless rate rose to 9.2 percent, the highest this year. “The one thing that’s going to restrain the demand recovery is this very high unemployment rate,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicts oil in New York will average $113 a barrel in the third quarter. “It dims the outlook on the second half of the year for demand.” Oil prices may extend declines in New York after failing to breach the 50-day moving average last week, according to data compiled by Bloomberg. “Strength above the 50-day moving average of $98.80 should send the bulls towards our $101.20 inflection high,” Stephen Schork, president of the Schork Group Inc. energy advisory company in Villanova, Pennsylvania, said in a daily report e- mailed today. “All eyes will be on Thursday’s retail sales.” Stagnant Sales The Commerce Department’s July 14 report may show sales at U.S. retailers stagnated in June after falling 0.2 percent in May, based on the median forecast in a Bloomberg News survey. China imported 19.7 million metric tons and exported 270,000 tons of crude, customs data showed. Net imports of fuel, including gasoline and diesel, rose to 1.36 million tons in June from 930,000 tons in May, according to the data. Net purchases reached a 29-month high of 2.07 million tons in December. Net-long bets on crude gained by 12,343 futures and options combined, or 8.1 percent, to 165,491, in the seven days ended July 5, according to the Commodity Futures Trading Commission’s Commitments of Traders report. On the ICE Futures Europe exchange, hedge funds and other money managers increased their net-long Brent crude position in the week ended July 5. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 67,782 contracts, the London-based exchange said today in its weekly Commitment of Traders report. Net long positions rose by 24,474 contracts from a week earlier. To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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