Brent crude fell below $100 a barrel for the first time since July amid signs global economic growth may slow, curbing fuel demand. West Texas Intermediate declined to a four-month low on speculation U.S. supplies rose.
Brent futures slid as much as 2.6 percent to $98 a barrel, while WTI dropped 3 percent to the lowest intraday price since Dec. 14. Oil retreated yesterday after reports showed manufacturing in the New York region expanded less than projected and China’s economic growth unexpectedly eased. U.S. crude stockpiles probably climbed 1.5 million barrels last week to 390.4 million, the highest since July 1990, according to a Bloomberg survey before a government report tomorrow.
“There is a level of confidence evaporating from the market,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “The market is starting to realize that without geopolitical events happening around the world that there is no reason to have a premium factored in,” he said, predicting WTI may drop as low as $82 a barrel.
Brent for June settlement fell as much as $2.63 on the London-based ICE Futures Europe exchange, and was at $98.61 at 1:07 p.m. Sydney time. The volume of all futures traded was more than five times higher than the 100-day average for the time of day. The May contract dropped $2.72 to $100.39 yesterday as it expired. The front-month European benchmark grade was at a premium of $11.66 to WTI futures.
Goldman Recommendation
WTI for May delivery slipped as much as $2.65 to $86.06 a barrel in electronic trading on the New York Mercantile Exchange. Prices are down a fourth day, the longest run of declines this year. The volume of all futures traded was almost four times higher than the 100-day average. The contract fell $2.58 to $88.71 yesterday, the lowest close since Dec. 24.
Goldman Sachs Group Inc. dropped a recommendation to hold a “long” position in the S&P GSCI Brent Total Return Index, citing weakness in European demand for refined fuels and a slowdown in China. Holding the position since it was first recommended in August would have resulted in a loss of almost 16 percent, the bank said in a report yesterday.
U.S. gasoline stockpiles probably fell by 800,000 barrels, according to the median estimate of seven analysts in the Bloomberg survey before tomorrow’s report from the Energy Information Administration. Distillate supplies, a category that includes heating oil and diesel, probably declined 500,000 barrels, the survey shows.
Pump Prices
The industry-funded American Petroleum Institute will release separate inventory figures today. The 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 EIA, the Energy Department’s statistics unit, for its weekly survey.
Retail gasoline fell to $3.542 a gallon in the U.S. this week, the EIA said on its website yesterday. The pump price is the lowest for this time of year in three years, according to data compiled by Bloomberg.
Manufacturing in the New York region expanded less than projected in April as orders cooled and sales stagnated. The Federal Reserve Bank of New York’s general economic index dropped to 3.1 this month from 9.2 in March. Readings exceeding zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection of 47 economists surveyed by Bloomberg was 7.
China Demand
China’s gross domestic product in the first quarter rose 7.7 percent from a year earlier, the Beijing-based National Bureau of Statistics said yesterday. That compares with the 8 percent median forecast in a Bloomberg survey and 7.9 percent in the prior quarter.
The world’s second-largest oil consumer accounted for 11 percent of global use last year, behind only the U.S. at 21 percent, the International Energy Agency said in its April 11 monthly oil market report. The IEA predicted that China’s demand would grow by 380,000 barrels a day, accounting for almost half of the net increase in global consumption.
Brent’s decline in London may stall as technical indicators show prices may be falling too quickly for further losses to be sustainable. On the weekly chart, the relative strength index is approaching 30, a reading that would signal futures are oversold. Brent rebounded from below $90 a barrel in June 2012 after the RSI dropped to 25.4. It is also reaching long-term support along the 200-week average, around $97.70. Buy orders tend to be clustered near chart-support levels.
Source: Bloomberg
