WTI Crude Falls a Second Day as China Signals Economic Slowdown

By Ben Sharples 

West Texas Intermediate crude fell a second day amid speculation that weaker-than-expected economic growth in the U.S. and a slowdown in China will curb fuel demand in the world’s biggest oil consumers.

Futures decreased as much as 0.6 percent in New York. Net income by Chinese industrial companies increased 5.3 percent in March from a year earlier, down from 17 percent growth in the first two months, the Beijing-based National Bureau of Statistics said April 27. WTI crude snapped a six-day rising streak on April 26 after a Commerce Department report showed theU.S. economy expanded less than estimated in the first quarter.

“We’ve seen moderately disappointing economic data,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney who predicts WTI may see support in the $91 to $92 a barrel range after it rose above the 200-day moving average last week. “The GDP number was the first. The figures on the profitability of China’s industrial companies are another set of data that creates an overall picture of moderating growth.”

WTI for June delivery slid as much as 57 cents to $92.43 a barrel in electronic trading on theNew York Mercantile Exchange and was at $92.52 at 1:55 p.m. Singapore time. The volume of all contracts traded was 34 percent below the 100-day average. Futures slid 64 cents to $93 on April 26, trimming the first weekly advance in a month.

Brent for June settlement decreased as much as 59 cents to $102.57 a barrel on the London-based ICE Futures Europe exchange. The front-month European benchmark grade was at a premium of $10.06 to WTI futures, from $10.16 on April 26.

‘Economic Risk’

Morgan Stanley is “skeptical” that the spread between WTI and Brent can fall on a sustained basis, the bank said in a report e-mailed today. Any significant narrowing would be a selling opportunity as differentials will probably widen again throughout the year, it said.

Brent oil at $100 “is more reasonable-looking at the fundamentals,” Robin Mills, the head of consulting at Dubai- based Manaar Energy Consulting and Project Management, said yesterday. “Some of the geopolitical risk has come off and the economic risk is to the downside for prices.”

U.S. gross domestic product grew at a 2.5 percent annual rate in the three months ended March, according to the government report in Washington. That compares with a forecast gain of 3 percent by economists surveyed by Bloomberg News.

Technical Trend

Net-long positions in WTI crude held by money managers, including hedge funds, commodity pools and commodity-trading advisers, dropped in the week ended April 23, according to the Commodity Futures Trading Commission’s April 26 Commitments of Traders report. They fell by 624 futures and options combined to 182,408, the CFTC report showed.

WTI is extending losses as an indicator of technical momentum falters. The 50-day moving average, at $92.65 a barrel today, has dropped below the 100-day moving average for the first time in three months, according to data compiled by Bloomberg. Investors typically sell contracts on a “death cross,” when a moving average falls below a longer-term one. The 50-day average is about 84 cents above the 200-day mean, the smallest premium since February.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

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