Bloomberg News

Oil Drops on Rising U.S. Fuel Supplies, Slowing Economic Growth

November 23, 2011

Nov. 23 (Bloomberg) -- Oil dropped from a three-day high in New York as investors speculated that rising gasoline stockpiles in the U.S. and slowing economic growth in Europe will reduce demand for fuel.

Futures slipped as much as 1.7 percent before data today that may show shrinking manufacturing and services in Europe this month and falling U.S. durable-goods orders in October. The American Petroleum Institute said motor-fuel supplies climbed 5.42 million barrels last week. The U.S. economy expanded less than previously estimated in the third quarter, Commerce Department figures showed yesterday.

“There’s no reason for investors at the moment to be putting risk back on,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said in a telephone interview. “The API figures added to the moderate tone of the market, but the main picture remains what’s happening in Europe.”

Crude oil for January delivery slid as much as $1.62 to $96.39 a barrel in electronic trading on the New York Mercantile Exchange and was at $96.51 at 3:27 p.m. in Singapore. The contract gained 1.1 percent yesterday to $98.01, the highest close since Nov. 17. Prices are up 19 percent from a year ago.

Brent oil for January settlement decreased $1.06 to $107.97 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to West Texas crude was at $11.47. The spread reached a record high of $27.88 on Oct. 14.

West Texas Contango

West Texas Intermediate oil futures for January become less expensive yesterday than those for the months through August. The market situation, known as contango, can signal concern that global economic growth will slow.

The January contract was at a discount to August oil today for the first time since Oct. 21. Futures closest to expiration moved into backwardation on Oct. 24, meaning that near-term contracts became more expensive than the ones for later delivery. Front month crude was 84 cents cheaper than August today, compared with 27 cents more expensive on Nov. 21.

A preliminary reading of a euro-area composite index based on a survey of purchasing managers in manufacturing and services industries fell to 46.1 in November from 46.5 last month, according to the median estimate of economists surveyed by Bloomberg News. That would be the least since June 2009. Markit Economics will release the report today.

A recession has probably already started in Europe, Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, said in a Bloomberg Television interview.

Motor Fuel

Motor-fuel demand, based on output from refineries, slumped 2.7 percent to 9.5 million barrels a day, the lowest level since Oct. 14, the API showed. Distillate demand, including diesel and heating-oil consumption, declined 5 percent to 4.99 million barrels daily, the least since Sept. 16, the data said.

An Energy Department report today may show an increase of 1 million barrels in gasoline supplies, according to the median of 13 analysts surveyed by Bloomberg News.

Crude inventories fell 5.57 million barrels to 335.7 million last week, the API said, compared with a forecast for a 500,000 gain in the Bloomberg survey. Distillate fuel inventories dropped 886,000 barrels to 138.1 million, the API’s weekly report showed. They are projected to decline 1.25 million barrels, the survey shows.

Inventories at Cushing, Oklahoma, the delivery point for futures traded on the New York Mercantile Exchange, rose 791,000 barrels to 32.8 million.

Durable Goods

The 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.

Durable goods orders may have dropped 1.2 percent in October, following a revised 0.6 percent decline the previous month, according to economists surveyed by Bloomberg before a report from the Commerce Department.

U.S. gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate, revised Commerce Department figures showed yesterday. The median forecast of 81 economists surveyed by Bloomberg News called for no revision.

--Editors: Mike Anderson, Paul Gordon

To contact the reporter on this story: Ben Sharples in Melbourne at

To contact the editor responsible for this story: Alexander Kwiatkowski at

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