BLBG:WTI Oil Extends Losses as Stockpiles Rise, China Factories Slow
West Texas Intermediate oil fell for a third day, extending the biggest decline in three weeks as U.S. gasoline stockpiles gained and manufacturing in China shrank for the first time in seven months.
Futures slid as much as 1.2 percent in New York after losing 2 percent yesterday, the most since May 1. Gasoline inventories rose 3 million barrels last week, the Energy Information Administration reported yesterday. A preliminary reading of China’s Purchasing Managers Index dropped to 49.6 for May, the lowest since October and missing estimates. U.S. Fed Chairman Ben S. Bernanke signaled the central bank may reduce monthly bond purchases.
“China’s PMI data coming in below forecast is adding a strong downdraft across most commodity markets today,” said Mark Keenan, a director of commodities research and strategy at Societe Generale SA in Singapore. “The comments from the Fed, hinting at the scaling back of quantitative easing if the economy improves further, have driven the dollar higher, which is also contributing to the general weakness. These factors are driving oil prices lower today.”
WTI for July delivery fell as much as $1.17 to $93.11 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.25 at 2:37 p.m. Singapore time. The volume of all contracts traded was 11 percent above the 100-day average. Prices slid $1.90 to $94.28 yesterday, the lowest close since May 14.
China Factories
Brent for July settlement declined as much as $1.06, or 1 percent, to $101.54 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $8.38 to WTI futures. The spread widened for the first time in five days to $8.32 yesterday.
The China manufacturing index for May released today by HSBC Holdings Plc and Markit Economics showed the first contraction in seven months. It’s below a median estimate of 50.4 in a Bloomberg survey of economists, which was also the final measure for April. A reading above 50 indicates expansion.
China is the world’s second-largest oil consumer, accounting for 11 percent of global demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. is the biggest user at 21 percent.
Bernanke said yesterday the Federal Reserve may taper its $85 billion a month of purchases if it’s confident of a sustained improvement in the U.S. economy. The Dollar Index was little changed after almost reaching a three-year high today.
Crude Supplies
While U.S. commercial crude inventories have shrunk the past two weeks, stockpiles remained near the highest level since at least 1931, according to the EIA, the Energy Department’s statistical arm.
Supplies at Cushing, Oklahoma, the delivery point for WTI contracts traded in New York and the biggest U.S. storage hub, rose 449,000 barrels to 50.2 million last week, the report shows. That’s the highest in a month.
“Stockpiles are very high and have been that way for a very long time,” said David Lennox, an analyst at Fat Prophets in Sydney. “We’re coming up to the driving season and one would expect to see significant drawdowns going forward.”
The U.S. Memorial Day holiday on May 27 marks the start of the country’s peak gasoline demand period.
Gasoline production climbed 285,000 barrels a day to 9.21 million last week, the fastest rate this year, the EIA data shows. Distillate-fuel inventories, a category that includes heating oil and diesel, dropped 1.1 million barrels. They were projected to increase 1 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg.
WTI’s decline may slow as futures approach technical support along the middle Bollinger Band on the 30-day chart, according to data compiled by Bloomberg. This indicator, at around $93.07 a barrel today, is near where prices rebounded last week. Buy orders tend to be clustered close to chart-support levels.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
