WTI Crude Falls to Lowest This Year on Surprise China Slowdown

By Ben Sharples & Ramsey Al-Rikabi 

West Texas Intermediate dropped below $90 a barrel to the lowest level in more than three months as economic growth unexpectedly eased in China, the world’s second-largest crude consumer.

Futures slid as much as 2.8 percent to $88.73 in New York, the lowest since Dec. 26. China’s gross domestic product in the first quarter rose 7.7 percent from a year earlier, according to the National Bureau of Statistics. That compares with the 8 percent median forecast in a Bloomberg survey and 7.9 percent in the prior quarter. The World Bank cut its forecast for the nation’s economic growth. Nicolas Maduro was elected president of Venezuela, OPEC’s third-biggest oil producer.

“This decline is due to the bad GDP number out of China,” said Ken Hasegawa an energy-trading manager at Newedge Group in Tokyo. “It was worse than expected.”

WTI for May delivery decreased as much as $2.56 in electronic trading on the New York Mercantile Exchange and was at $88.76 a barrel at 2:35 p.m. Sydney time. The volume of all futures traded was 250 percent above the 100-day average. Prices slid to $88.59 in intraday trading on Dec. 26 and last settled below $90 on Dec. 24.

Brent for May settlement, which expires today, fell $2.27, or 2.2 percent, to $100.84 a barrel on the London-based ICE Futures Europe exchange. The more-active June future dropped $2.24 to $100.80. The front-month European benchmark grade was at a premium of $11.90 to WTI futures.

Growth Moderation

The World Bank reduced its forecast for China’s economic growth in 2013 to 8.3 percent from 8.4 percent. The Washington- based lender trimmed its outlook for Developing East Asia, which excludes Japan and India, to 7.8 percent from 7.9 percent estimated previously, according to its East Asia and Pacific Economic Update.

U.S. retail sales slid 0.4 percent in March, the biggest decline since June, Commerce Department figures showed April 12 in Washington. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading. The U.S. accounted for 21 percent of the world’s crude consumption in 2011 and China for 11 percent, according to BP Plc (BP/)’s Statistical Review of World Energy.

“We are beginning to see a picture of what could be a moderation in U.S. economic growth,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “Given the supply situation and the growth in supplies, the market really needed either increased political risk or a better-than-expected demand outlook to hold those prices up.”

Iran Outlook

The global economy is weak and there would be a surplus of crude without recent output cuts by the Organization of Petroleum Exporting Countries, Iran’s oil ministry news agency Shana said April 13, citing Mohammad Ali Khatibi, the nation’s OPEC governor. Consumption will decline through the northern- hemisphere spring, affecting prices, Khatibi also said, according to the Islamic republic’s Fars news agency. Consumers have no problem with oil trading in a range of $100 to $110 a barrel, he said.

Net-long positions in WTI held by money managers dropped for the first time in four weeks, according to the Commodity Futures Trading Commission’s April 12 Commitments of Traders report. They dropped by 9,080 futures and options combined, or 4.4 percent, to 196,330 in the week ended April 9, the CFTC report showed.

Hedge funds, commodity pools and commodity-trading advisers also slashed bullish bets on gasoline by the most in four months. Money managers reduced net-long positions by 17 percent to 63,856 futures and options combined, the largest drop since Dec. 11. Gasoline futures for May delivery slid 5.28 cents, or 1.9 percent, to $2.749 a gallon on Nymex today.

Refinery Outage

Exxon Mobil Corp. shut its Joliet refinery in Illinois for “planned routine maintenance,” Tricia Simpson, a spokeswoman for the company, said yesterday. The plant, which can process 238,000 barrels of crude and produce about 9 million gallons of gasoline and diesel fuel daily, will be closed for “several weeks,” Simpson said.

Venezuela’s Maduro, a 50-year-old former bus driver, received 50.7 percent of votes, the nation’s electoral council said after more than 99 percent of ballots were counted. Henrique Capriles Radonski, who temporarily stepped down as governor of Miranda state to run for president, had 49.1 percent.

Poverty Reduction

Maduro campaigned on a pledge to deepen 14 years of the late Hugo Chavez’s socialist revolution. Chavez tapped the world’s biggest oil reserves to help cut poverty to 21.2 percent of the population in the second half of 2012 from 42.8 percent when he first took power in 1999, according to government data. Venezuela pumped 2.85 million barrels a day of crude last month, according to a Bloomberg survey of producers and analysts.

South Sudan has started pumping oil through Sudan, Skynews Arabia reported yesterday, without providing details. South Sudan halted production in January 2012 after accusing the Sudanese government of stealing $815 million of its oil, which Sudan said it took to recover unpaid fees. The nations agreed last month to resume southern oil shipments through a Red Sea export terminal within two weeks.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net

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