BLBG:WTI Crude Declines as Fuel Demand Drops Amid Economic Weakness
West Texas Intermediate fell for the fifth time in six days amid signs of economic weakness in the U.S. and Europe that threaten fuel demand.
Futures slid as much as 1.1 percent in New York. U.S. industrial production dropped the most in eight months in April, manufacturing in the New York region unexpectedly shrank in May and the euro-area economy contracted more than forecast in the first quarter. A report today will probably show U.S. housing starts slipped from an almost five-year high in April, according to a Bloomberg survey. A measure of U.S. fuel consumption fell by 584,000 barrels a day last week to 18.5 million barrels a day, Energy Information Administration data showed yesterday.
“It doesn’t look tight in the oil market for the coming five years,” Torbjoern Kjus, a senior oil analyst at DNB ASA in Oslo, said by telephone. “Spare capacity will rise, and I expect prices to continue to trend lower.”
WTI for June delivery lost as much as $1.07 to $93.23 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.56 at 11:03 a.m. in London. The volume of all contracts traded was 41 percent above the 100-day average. Prices yesterday closed 9 cents higher at $94.30, erasing a drop of as much as 2.2 percent, as investors speculated that central banks would act to boost their economies.
Brent Premium
Brent for June settlement, which expires today, slid as much as 73 cents, or 0.7 percent, to $102.95 a barrel on the London-based ICE Futures Europe exchange. The more actively traded July future was down 30 cents at $103.20 a barrel. The European benchmark crude traded at a premium of $9.85 to WTI. The spread was $9.38 yesterday, the widest since April 26. It closed at $7.65 on May 13, the narrowest since January 2011.
“All the key players on the demand side basically see muted growth,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “That will put significant downward pressure on crude prices. The EIA numbers, especially diesel, have shown for the last couple of weeks a weakening trend.”
U.S. gasoline consumption shrank 1.2 percent last week to 8.34 million barrels a day, the lowest level since March 15, according to the report from the EIA, the Energy Department’s statistics unit. Demand for distillate fuels, including heating oil and diesel, decreased 2.4 percent.
Housing Starts
Gasoline stockpiles rose 2.59 million barrels to 217.7 million, the biggest gain since January, the data showed. Supplies were expected to decrease by 1.1 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News. Distillate inventories climbed 2.3 million barrels to 119.9 million, more than a 475,000-barrel gain projected in the survey.
A U.S. Commerce Department report at 8:30 a.m. in Washington may show new-home construction dropped to a 970,000 annual rate after jumping in March to a 1.04 million pace, according to the median estimate of 81 economists surveyed by Bloomberg.
Output at U.S. factories, mines and utilities in April decreased 0.5 percent and March figures were revised to a 0.3 percent gain, weaker than previously reported, the Federal Reserve said yesterday. Manufacturing in New York, northern New Jersey and Connecticut declined for the first time since January, the Federal Reserve Bank of New York said.
Euro-Area Recession
Gross domestic product in the 17-nation euro area fell 0.2 percent in the three months ended March after a 0.6 percent decline in the previous quarter, the European Union’s statistics office in Luxembourg said. That extends the currency bloc’s recession to a record sixth quarter.
The EU accounted for 16 percent of the global oil consumption in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. is the largest consumer and used 21 percent.
WTI is falling as a measure of technical momentum declines. On the daily chart, the moving average convergence-divergence indicator has almost erased a premium to its signal line, according to data compiled by Bloomberg. Investors typically sell contracts on a so-called bearish MACD crossover. Crude dropped in December, February and April after a similar technical pattern.
To contact the reporters on this story: Paul Gordon in Hong Kong at pgordon6@bloomberg.net; Winnie Zhu in Singapore at wzhu4@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
