Bloomberg News

Oil Fluctuates as It Heads for Biggest Quarterly Drop Since 2008

September 29, 2011

Sept. 29 (Bloomberg) -- Oil in New York headed for its biggest quarterly drop since 2008 as investors speculated that global economic growth will slow and curb fuel demand amid rising supplies.

West Texas Intermediate futures, down 15 percent since June 30, were little changed today. Crude stockpiles rose 1.92 million barrels last week, the U.S. Energy Department said. Morgan Stanley cut its Brent oil forecast to $100 from $130 on weaker demand and increasing OPEC production. A Bloomberg poll indicated Chinese growth is poised to ease.

“We’re trading from headline to headline and that’s all markets, not just the oil market,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney. “The gap is closing between Brent and West Texas and that could be an indication that there is some easing in the supply-side concerns from the Middle East.”

Crude for November delivery was at $81.15 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 2:16 p.m. Sydney time, after falling as much as 1.9 percent. The contract yesterday slid 3.8 percent to $81.21. Futures are down 9 percent this month and 11 percent this year. The quarterly decline is the biggest since the last three months of 2008.

Brent oil for November settlement was at $103.94 a barrel, up 13 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.79 to New York crude, compared with a record of $26.87 on Sept. 6.

Slower Growth

Economic growth in China, which consumes about a tenth of the world’s oil, will slow to less than 5 percent annually within five years, according to most investors in a Bloomberg Global Poll. Growth was 9.5 percent last quarter.

The European Union accounted for about 16 percent of global oil demand last year, according BP Plc’s annual Statistical Review of World Energy. German lawmakers vote today on an expansion of the euro area’s rescue fund as the region’s governments weigh further measures to support Greece.

Crude inventories climbed for for the first time in four weeks in the U.S., the world’s biggest user of the commodity, which accounts for about 21 percent of demand. Gasoline stockpiles rose 791,000 barrels in the week ended Sept. 23, the Energy Department report showed.

Libya Output

Production capacity in the Organization of Petroleum Exporting Countries will climb almost 800,000 barrels a day in 2012, led by the resumption of Libyan fields, Morgan Stanley analysts led by New York-based Hussein Allidina said in a report yesterday. Slowing global economic growth will curb demand, the analysts said.

Libyan crude production may reach as much as 400,000 barrels a day next month, Citigroup Inc. analysts including Edward Morse said in a note yesterday.

Fighting in Libya 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.

--Editor: Paul Gordon

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

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net


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