Bloomberg News

Oil Falls a Second Day on Speculation U.S., China Demand to Slow

October 13, 2011

Oct. 13 (Bloomberg) -- Oil dropped for a second day in New York as signs of weakening U.S. fuel demand and slowing crude imports in China stoked speculation that consumption will falter in the world’s largest energy users.

Futures fell as much as 1.9 percent before the Energy Department publishes figures that may show that crude inventories rose last week. The American Petroleum Institute said yesterday that U.S. gasoline demand slid the most in more than five years. China’s net crude imports declined to the third-lowest level this year, the customs bureau said today.

“Oil prices are still high compared to the economic risks we face, not only in Europe but also in the U.S. and Asia,” said Sintje Diek, an analyst at HSH Nordbank in Hamburg who correctly predicted in January that prices would fall in the second half of the year. “Overall, volatility is very high.”

Crude for November delivery on the New York Mercantile Exchange declined as much as $1.63 to $83.94 a barrel in electronic trading. It was at $84.11 at 1:09 p.m. London time. Yesterday, the contract slid 24 cents, or 0.3 percent, to $85.57. Prices are down 8 percent this year.

Brent oil for November settlement on the London-based ICE Futures Europe exchange fell $1.76, or 1.6 percent, to $109.60 a barrel. The European benchmark crude was at a premium of $25.49 to the U.S. contract. It reached a record of $26.87 on Sept. 6. The more actively traded December Brent future fell $1.20 to $107.77.

Gasoline Consumption

Implied gasoline demand in the U.S., the world’s biggest oil consumer, dropped 10.5 percent in the week to Oct. 7, the API report showed. That’s the biggest decline since March 2006. Crude stockpiles fell 3.81 million barrels to 340.4 million, the lowest in nine months.

The Energy Department may say today inventories rose 800,000 barrels, according to the median estimate of 15 analyst surveyed by Bloomberg News. Initial jobless claims in the U.S., the world’s biggest crude consumer, rose for a second week to 405,000 in the period ended Oct. 8, a separate report may show.

Oil may extend losses in New York if futures settle below chart support along the 50-day moving average, according to data compiled by Bloomberg. Prices have closed in the past three days above this level, around $84.86 a barrel today. Sell orders tend to be clustered below technical-support levels.

China Economy

China, the world’s second-largest oil user, reduced net imports of the commodity in September as the economy slowed. Net purchases declined to 4.92 million barrels a day last month from 4.95 million in August, according to data from the General Administration of Customs today. Purchases exceeded 5 million barrels a day in each of the first five months of this year.

The nation’s economic growth slowed to 9.3 percent in the third quarter from 9.5 percent in the second, based on the median estimate of economists polled by Bloomberg News. Export growth in September slowed to the lowest in seven months, a report today showed.

The International Energy Agency cut its 2012 oil-demand estimate by 210,000 barrels a day yesterday and predicted output from Libya will rebound faster than earlier forecast.

Libya, a member of the Organization of Petroleum Exporting Countries, may pump about 600,000 barrels a day of crude by the end of the year, up from an earlier estimate of as much as 400,000 barrels, according to the IEA. The national oil company and international partners have restored production from some areas and four fields have started, the Paris-based agency said.

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

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ayesha Daya in Dubai at adaya1@bloomberg.net

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


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