Bloomberg News

Oil Drops in New York on Bets of Lower Demand, Higher Supplies

September 21, 2011

Sept. 21 (Bloomberg) -- Oil fell in New York as investors bet that rising U.S. fuel stockpiles are a signal of waning demand, while supplies from the Middle East and Africa grow. Brent crude in London widened its premium over U.S. futures.

New York oil slipped as much as 1.3 percent after the American Petroleum Institute said yesterday crude and gasoline supplies increased last week. A separate Energy Department report today is forecast to show inventories declined. Libya’s Arabian Gulf Oil Co. said it will be ready to export crude within a week.

“Sentiment is still fragile,” Carsten Fritsch, an analyst at Commerzbank AG, said by phone from Frankfurt. “The general trend is still downwards,” as gasoline demand in the U.S. is weak and Libyan oil supplies appear to be resuming sooner than expected, he said.

Crude for November delivery dropped as much as $1.12 to $85.80 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.87 at 1:16 p.m. London time. Yesterday, the contract advanced 1.3 percent to $86.92. Prices have risen 17 percent in the past year.

Brent oil for November settlement erased earlier gains, declining 36 cents, or 0.3 percent, to $110.18 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to the West Texas Intermediate futures traded in New York widened to $24.28 after closing at $23.62 yesterday. The spread settled at a record $26.87 on Sept. 6.

U.S. Inventories

The API said crude supplies increased by 2.57 million barrels last week. Today’s Energy Department report today was forecast to show stockpiles declined by 1.3 million barrels, according to a Bloomberg News survey.

U.S. gasoline stockpiles climbed by 62,000 barrels, the API reported. The Energy Department’s report may show inventories increased 1.35 million barrels, based on the median of 16 analyst estimates in the survey.

“API data were mixed-to-negative,” Tom Pawlicki, a Chicago-based analyst at MF Global Holdings Ltd., said today in a note. “Energy prices are expected to trade in a mixed-to- lower direction in the near term.”

The industry-funded 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 Energy Department for its weekly survey.

Libya’s Return

Libya’s Arabian Gulf Oil Co. will be ready to export 1 million barrels of crude within a week as its marketing department evaluates several offers for shipments, Hassan Bolifa, a company official, said yesterday.

“If it’s true that we’ll see the oil coming out in weeks rather than months, then the Brent-WTI differential will narrow to a more reasonable level,” said Ole Hansen, senior manager of trading advisory team at Saxo Bank A/S in Copenhagen.

Fighting in the African nation since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

Brent crude’s price will drop in the fourth quarter as global demand slows and production increases in Libya and the North Sea, Bank of America Corp. said in a note dated Sept. 19. It will average $102 a barrel in the three months ended Dec. 31, said New York-based commodity strategist Francisco Blanch.

IMF Cuts Forecasts

The International Monetary Fund yesterday cut its growth forecast for the world’s two biggest energy consumers. The Washington-based lender reduced China’s growth this year to 9.5 percent from the 9.6 percent projected in June and said the U.S. economy will expand 1.5 percent, down from 2.5 percent.

The first North Sea Forties crude cargo for October loading was deferred, and a third September shipment was delayed to next month, according to a revised export program obtained by Bloomberg News. Forties is one of four North Sea crude grades used to price Dated Brent.

--Editors: Alessandro Vitelli, John Buckley.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Nidaa Bakhsh in London at nbakhsh@bloomberg.net

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


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