Bloomberg News

Oil Slips for Third Day After Decline in Consumer Confidence

January 31, 2012

Jan. 31 (Bloomberg) -- Oil fell for a third day, ending the month with a loss, after an unexpected drop in U.S. consumer confidence in January.

Oil slipped with equities as the Conference Board’s confidence index decreased to 61.1 from a revised 64.8 reading in December. Futures rose as much as 2.5 percent in intraday trading as Germany’s unemployment rate fell to a record low.

“The consumer confidence number was quite disappointing and it weighed on oil,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “It continues to demonstrate how U.S.-centric financial-market participants are.”

Crude for March delivery dropped 30 cents, or 0.3 percent, to settle at $98.48 a barrel on the New York Mercantile Exchange. Prices slipped 0.4 percent this month, the smallest movement since July. Oil ranged from $97.40 to $103.74 in January. The range of $6.34 was the tightest since October 2010.

Brent oil for March settlement rose 23 cents to $110.98 a barrel on the London-based ICE Futures Europe exchange, capping a 3.4 percent monthly increase.

The U.S. confidence figure was lower than the most pessimistic projection by economists surveyed by Bloomberg News. The median forecast in the survey was 68. Readings above 50 signal growth. The Standard & Poor’s 500 Index also reversed an advance after the report was released.

“The confidence number is weak and that’s definitely going to put pressure on the market in the short term,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “It’s all led by equities. This is the last day of the month and fund managers want to lock in some gains.”

Economic Data

Oil also moved lower as data showed business activity in the U.S. cooled in January and residential real estate prices fell more than forecast in November.

The Institute for Supply Management-Chicago Inc. said its business barometer declined to 60.2 from 62.2 in December. Economists forecast the gauge would rise to 63, according to the median of 57 estimates in a Bloomberg survey.

The S&P/Case-Shiller index of property values in 20 cities declined 3.7 percent in November from a year earlier after decreasing 3.4 percent in the year ended in October, the group said in New York. Economists projected a 3.3 percent drop, according to the median estimate in a Bloomberg News survey.

“Expectations have become more bullish and now people are disappointed,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The economy’s been kind of stuck in this twilight zone between expansion and recession.”

Markets Lower

The S&P 500 Index ended the day little changed after rising as much as 0.6 percent. It gained 4.4 percent for the month. The Standard & Poor’s GSCI Index of 24 raw materials slid 0.1 percent after rising as much as 1.6 percent.

“Basically all the markets are moving lower,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York.

Oil gained earlier after the Nuremberg-based Federal Labor Agency said Germany’s adjusted jobless rate slipped to 6.7 percent, the lowest level since records began in 1991, and Greek Prime Minister Lucas Papademos said he’s “strongly committed” to reaching a debt-swap pact with bondholders

European Union leaders completed a fiscal-discipline treaty yesterday that speeds sanctions on high-deficit states. The treaty also requires euro countries to anchor balanced-budget rules in national law.

“The German unemployment number was pretty positive,” said Schenker. “There is some optimism that the Greek debt crisis may finally get resolved.”

Chinese Add Storage

China raised its oil inventory capacity to 40 days of supply by the end of last year as it opened new state-owned and commercial storage sites, China National Petroleum Corp. said.

The world’s biggest energy consumer finished building two state-owned stockpiles and four commercial ones in 2011, Beijing-based CNPC said on its website, without specifying the locations. China is building six more strategic petroleum reserve bases as part of the second phase of a program to store oil for emergencies, according to the statement.

The China news “could also be supportive of prices,” Schenker said.

Oil volume in electronic trading on the Nymex was 666,804 contracts as of 3:23 p.m. in New York. Volume totaled 459,289 yesterday, 20 percent below the three-month average. Open interest was 1.38 million contracts.

--With assistance from Shobhana Chandra, Alex Kowalski and Bob Willis in Washington, Simone Meier in Zurich and Jonathan Stearns in Brussels. Editors: Richard Stubbe, Dan Stets

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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