Bloomberg News

Oil Trades Near One-Month Low on U.S., Chinese Demand Concerns

June 14, 2011

June 14 (Bloomberg) -- Oil traded near the lowest in almost a month as signs of slowing growth in the U.S. and China’s moves to tackle inflation spurred concern fuel demand may falter.

China, the world’s largest energy user, ordered lenders to set aside more cash as reserves after inflation accelerated to the fastest pace in almost three years. Consumer prices in the country climbed 5.5 percent, the quickest pace since 2008. In the U.S., a report today may show retail sales fell in May for the first time in 11 months. The industry-funded American Petroleum Institute will report stockpile data today.

“Fundamentals in the U.S. are still gloomy,” said Carsten Fritsch, an analyst with Commerzbank AG in Frankfurt. “The economy is slowing; demand is lackluster. We see oil prices headed lower in the near term.”

Crude for July delivery on the New York Mercantile Exchange fell as much as 54 cents, or 0.6 percent, to $96.51 a barrel and was at $96.76 at 12:49 p.m. London time. The contract yesterday declined $1.99, or 2 percent, to $97.30, the lowest settlement since May 17. Futures have gained 29 percent in the past year.

Brent oil for July delivery was up 19 cents at $119.29 a barrel on the London-based ICE Futures Europe exchange. The more actively traded August contract gained 26 cents to $118.68. The front-month European benchmark contract was at a premium of $22.53 to U.S. futures after reaching a record $22.72 earlier.

Chinese Economy

“The market is concerned about economic growth,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted crude in New York will average $100 a barrel this year. “The economics suggest oil should be lower rather than higher.”

China’s Communist Party is seeking to tame inflation and sustain growth after riots this month by migrant workers in the manufacturing hub of Guangdong. The central bank has raised interest rates four times since October to cool the economy.

Chinese refiners processed 38.5 million metric tons of crude in May, 6 percent more than a year earlier, the China Federation of Logistics and Purchasing said today. Gasoline output climbed 3.6 percent and diesel production rose 8.2 percent. China uses more oil than any country except the U.S.

U.S. advance retail sales probably dropped 0.5 percent last month, according to the median estimate of 81 economists surveyed by Bloomberg News before a Commerce Department report today. Sales advanced 0.5 percent in April.

“Almost every day, there is some fresh economic data that seems to fit better in an anemic recovery than in one that is robust or dynamic,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in an e-mailed note.

Fuel Supplies

U.S. gasoline stockpiles probably increased for a sixth week last week, according to a Bloomberg News survey before an Energy Department report tomorrow. Supplies rose 1 million barrels from 214.5 million, based on the median estimate of eight analysts. Crude inventories may have decreased 1.75 million barrels from 369 million, the poll showed.

Oil in New York is likely to remain in a “consolidation range” of $95 to $105 a barrel, based on technical charts, according to The Schork Group Inc.

A breach of yesterday’s low of $96.13 a barrel may indicate prices will fall to $95.68 and $94.06, said Stephen Schork, president of the consultant in Villanova, Pennsylvania. A recovery to $98.10 will “clear a path” to $98.92 and $100.54, he said.

--With assistance from Yee Kai Pin in Singapore. Editors: John Buckley, Raj Rajendran

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net


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