MW: Oil falls over 2% on demand worry, ample supply
More supply data, Fed comments on economy expected
By Myra P. Saefong and Carla Mozee, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures fell more than 2% Wednesday as a slowdown in U.S. private-sector jobs growth raised worries over energy demand and after a trade group reported a bigger-than-expected climb in last week’s crude inventories.
The market awaits confirmation of the trade group’s supply numbers from a U.S. government report due at 10:30 a.m. Eastern.
Crude oil for June delivery CLM3 -2.46% fell $2.38, or 2.6%, to $91.08 a barrel on the New York Mercantile Exchange.
The June contract for rival benchmark Brent crude UK:LCOM3 -2.31% fell $2.18, or 2.1%, to $100.19 a barrel in London. The move extended Tuesday’s loss of 1.4%.
”Oil is trading on fundamentals and expectations of slower growth,” said James Williams, energy economist at WTRG Economics.
“The strong build in crude stocks in the [American Petroleum Institute] data is of course bearish,” he said.
Late Tuesday, the American Petroleum Institute said U.S. crude supplies surged 5.2 million barrels in the week ended April 26. A Platts survey of analysts had forecast a climb of 1.4 million barrels.
The API data were due to be followed Wednesday by the more closely watched report from the U.S. Energy Information Administration.
“If the EIA data confirms API, it should be a down day for oil and a down week if Friday’s jobs data mirror ADP,” said Williams.
Automatic Data Processing Inc. reported Wednesday that private employers added 119,000 jobs in April, the weakest gain since September. The ADP report offers some guidance on the U.S. Department of Labor’s jobs estimate, which will be released Friday.
China feeds worry
Further feeding worries about the prospects for energy demand, China’s official gauge of manufacturing activity fell in April, though the index still registered mild growth. The manufacturing purchasing managers’ index came in at 50.6, and economists surveyed by Dow Jones Newswires had expected an unchanged reading from March at 50.9.
The PMI report “suggests that the China economy remains on the recovery path, but the recovery momentum is relatively weak,” wrote Asia Pacific emerging-markets analysts at J.P. Morgan to clients. China, the world’s second largest-economy, is a major consumer of oil and other commodities.
HSBC last week released a similarly weak reading of its version of the China manufacturing PMI for April. It fell to a preliminary result of 50.5, down from its final March reading of 51.6. The final HSBC PMI for China is slated for release Thursday.
Investors may seek more demand-outlook clues on Wednesday from the U.S. Federal Reserve as it wraps up its two-day monetary-policy meeting.
The central bank may issue downbeat comments about the outlook for the U.S. economy after a string of soft domestic data. However, the Fed isn’t expected to make any changes in the pace or composition of its $85-billion-per-month asset-purchase program.
Oil futures on Tuesday fell, ending down $1.04, or 1.1%, on the New York Mercantile Exchange ahead of the API report, with a weak reading in Chicago manufacturing-activity data adding to the market’s concerns about physical demand for energy. Those demand concerns pressured Nymex oil prices in April, leaving them lower by 3.9%.
On Wednesday, June gasoline RBM3 -2.50% gave up nearly 8 cents, or 2.7%, to $2.72 a gallon, and June heating oil HOM3 -1.53% fell 5 cents, or 1.7%, to trade at $2.79 a gallon.
The API late Tuesday said gasoline inventories fell 2.7 million barrels and distillate stockpiles, which include heating oil, declined by 1.1 million barrels last week. Analysts were looking for a decline of 900,000 barrels in gasoline inventories and unchanged inventories for distillates, according to Platts.
June natural gas NGM13 +2.05% rose 8 cents, or 1.9%, to $4.43 per million British thermal units.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
