Bloomberg News

Oil Heads for Biggest Quarterly Decline in New York Since 2008

September 30, 2011

Sept. 30 (Bloomberg) -- Oil headed for its biggest quarterly drop in New York since the 2008 financial crisis as signs of slowing growth in China, the U.S. and Germany heightened concerns that fuel demand will suffer.

West Texas Intermediate futures have fallen 15 percent this quarter, the biggest drop since the three months ended Dec. 31, 2008. Chinese manufacturing fell for a third month, according to data from HSBC Holdings Plc, while Germany’s Federal Statistics office said retail sales declined the most in more than four months in August. U.S. consumer spending slowed in August as incomes declined, the Commerce Department said today. WTI’s discount to Brent oil narrowed for a sixth day, the longest streak since March 2010.

“There is a risk of slowdown in Chinese demand,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, who forecasts Brent prices at $100 in the next quarter. “The risks to the forecast in the fourth quarter and for 2012 as a whole are to the downside.”

Crude for November delivery on the New York Mercantile Exchange fell as much as $1.59, or 1.9 percent, to $80.55 a barrel and was at $80.64 at 1:52 p.m. London time. WTI is down 9.2 percent this month.

Brent oil for November settlement fell $1.57 to $102.38 a barrel on the ICE Futures Europe exchange in London. Prices are down 9 percent this quarter.

Brent Spread

Brent’s premium to WTI futures narrowed to $21.74 a barrel from $21.81 at settlement yesterday. The spread climbed to a record of $26.87 on Sept. 6 as fighting in Libya reduced the availability of light, sweet crude, or oil with low density and sulfur content. Libya is now producing 300,000 barrels a day of oil, said Ali Tarhouni, the official in charge of the North African nation’s finance and oil ministries, speaking to reporters in Tripoli yesterday.

Oil may fall next week on concern that Europe’s economy is showing signs of a slowdown as governments struggle to contain their fiscal crisis and avert a Greek default, according to a Bloomberg News survey. Thirteen of 28 analysts, or 46 percent, forecast oil will decline through Oct. 7, while eight respondents, or 29 percent, predicted prices will increase.

Greek Prime Minister George Papandreou will meet French President Nicolas Sarkozy today in Paris after seeing European Union President Herman Van Rompuy in Warsaw. European leaders next week will discuss a permanent rescue fund after German lawmakers approved an expansion of the temporary European Financial Stability Facility.

Spending Slows

Consumer spending in the U.S. slowed in August as incomes unexpectedly dropped for the first time in almost two years, Commerce Department figures showed today in Washington. Purchases rose 0.2 percent after a 0.7 percent increase the prior month.

German retail sales, adjusted for inflation and seasonal swings, slumped 2.9 from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast a 0.5 percent decline, according to the median of 18 estimates in a Bloomberg survey.

A gauge of manufacturing in China, which consumes about a tenth of the world’s oil, shrank for a third month, the longest contraction since 2009. The reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August and compared with a preliminary 49.4 figure published last week. China is the world’s second largest crude consumer.

--With assistance from Alexander Kowalski in New York. Editors: John Buckley, Raj Rajendran

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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


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