WTI Drops From One-Week High as China Manufacturing Growth Slows

By Ben Sharples 

West Texas Intermediate fell from the highest closing price in more than a week as a report signaled China’s manufacturing is slowing, raising concern fuel demand in the world’s second-biggest crude consumer will falter.

Futures slipped as much as 0.6 percent in New York after the preliminary reading of 50.5 for aPurchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics. The gauge compares with a final 51.6 for March and was below the median 51.5 estimate in a Bloomberg News survey of 11 analysts. U.S. crude stockpiles probably rose by 1.75 million barrels last week to 389.4 million, the highest level since July 1990, a separate Bloomberg survey showed before a government report.

“More investors are swinging around to a view that the growth rate for China’s economy might get a little bit weaker than had previously been assumed,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. The past three days of gains for crude were “a corrective rally against a deeper downtrend,” he said.

WTI for June delivery decreased as much as 53 cents to $88.66 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.73 at 2:02 p.m. Sydney time. The volume of all contracts traded was 21 percent above the 100-day average. The May future advanced 75 cents to $88.76, the highest close since April 12, as it expired yesterday. Prices are down 3.4 percent this year.

Brent for June settlement fell 54 cents to $99.85 a barrel on the London-based ICE Futures Europe exchange. The front-month European benchmark grade was at a premium of $11.12 to WTI futures, from $11.20 yesterday.

Technical Trend

WTI may resume its decline this week as a measure of technical momentum falters. On the weekly chart, the moving average convergence-divergence indicator has fallen below zero this week for the first time since January, according to data compiled by Bloomberg. Futures yesterday halted an intraday drop at $87.55 a barrel, the 200-week moving average. Buy orders tend to be clustered near chart-support levels.

China’s commercial stockpiles of crude rose 2.2 percent at the end of March from February, the first increase in six months, a report from Xinhua News Agency’s China Oil, Gas & Petrochemicals newsletter showed today. Xinhua doesn’t publish specific volumes.

U.S. Fuel Supplies

U.S. gasoline supplies were probably unchanged last week while distillate inventories, a category that includes heating oil and diesel, increased by 400,000 barrels, the Bloomberg survey showed before a report tomorrow from the Energy Information Administration. The nation’s crude output in the prior week increased 0.4 percent to 7.21 million barrels a day, the EIA, the Energy Department’s statistical arm, said April 17. Production was the highest since 1992 and 19 percent more than a year earlier.

The industry-funded American Petroleum Institute is scheduled to release separate supply data 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 for its weekly survey.

Global oil markets are in balance and receiving ample crude, Suhail Mohammed Al Mazrouei, the energy minister of the United Arab Emirates, said yesterday. The Organization of Petroleum Exporting Countries, which plans to meet May 31 to review its production target, is ensuring that global crude supplies are sufficient, he told reporters in Abu Dhabi.

The U.A.E.’s governor to OPEC, Ali Al Yabhouni, said the group’s limit of 30 million barrels a day is adequate for 2013 and predicted oil would trade at about $100 a barrel in the third quarter. OPEC’s basket of crude was at $97.40 on April 19. Both officials spoke at the Middle East Petroleum and Gas Conference.

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

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