Bloomberg News

Oil Drops From One-Week High on Economic Growth Concern

March 12, 2012

Hedge funds reduced bullish bets on oil for the first time in five weeks, according to the U.S. Commodity Futures Trading Commission. Photographer: Daniel Acker/Bloomberg

Hedge funds reduced bullish bets on oil for the first time in five weeks, according to the U.S. Commodity Futures Trading Commission. Photographer: Daniel Acker/Bloomberg

Oil fell from the highest price in more than a week after exports grew more slowly than forecast in China, the world’s second-largest crude consumer, signaling an economic slowdown.

Futures in New York slid as much as 1.2 percent, erasing last week’s gain. China had its biggest trade deficit last month in at least 22 years as Europe’s sovereign debt crisis damped exports, a March 10 report by the customs bureau showed. Overseas shipments increased 18 percent, less than a median estimate of 31 percent in a Bloomberg News survey. Hedge funds reduced bullish bets on oil for the first time in five weeks, according to the U.S. Commodity Futures Trading Commission.

“It’s a risk-off day,” said Carsten Fritsch, an analyst at Commerzbank Bank AG in Frankfurt who forecasts prices will decline further. “People have focused on the Chinese export numbers today, though given last month’s imports were super- strong we’re still expecting continued strong economic activity in China.”

Crude for April delivery fell as much as $1.34 to $106.06 a barrel on the New York Mercantile Exchange. It was at $106.08 at 12:31 p.m. London time. The contract rose 82 cents to $107.40 a barrel on March 9, the highest settlement since March 1. Prices are up 7.3 percent in 2012.

Brent oil for April settlement on the London-based ICE Futures Europe exchange lost as much as $1.43, or 1.1 percent, to $124.55 a barrel. The European benchmark contract was at a premium of $18.47 to New York-traded West Texas Intermediate grade, compared with a record $27.88 on Oct. 14.

Fibonacci Support

Oil in New York has technical support at $103.39 a barrel, according to data compiled by Bloomberg. On the weekly chart, that is the 61.8 percent Fibonacci retracement of the drop to $32.40 in December 2008 from a record high of $147.27 in July that year. Buy orders tend to be clustered near support levels.

Reports last week showed the weakest January-to-February gain in Chinese factory production since 2009 and retail sales falling below estimates. China accounted for about 11 percent of global oil demand in 2010, according to BP Plc (BP/)’s annual Statistical Review of World Energy. The U.S. consumed 21 percent.

“The data from China is a downside pressure on the oil market,” said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo who predicts oil will trade in a range from $105 to $110 a barrel this week in New York. “The trade deficit is much bigger than expected.”

Hedge-Fund Positions

Large speculators including hedge funds cut wagers on rising oil prices as concern eased about risks tied to Iran. Net-long positions on New York crude, in futures and options, combined fell by 7.3 percent in the week ended March 6, the CFTC said in its Commitments of Traders report March 9.

Money managers raised bullish bets on Brent crude by 5,568 contracts in the week ended March 6, data from ICE Futures Europe showed. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 132,370 lots, the London-based exchange said today in its weekly Commitment of Traders report.

U.S. President Barack Obama said March 6 that there is a “window of opportunity” for diplomacy and sanctions to compel Iran to give up any effort to develop nuclear weapons. Catherine Ashton, the European Union’s foreign policy chief, said world powers are ready to resume talks with the Persian Gulf nation.

Iran will never bow to international military threats, state television reported President Mahmoud Ahmadinejad as saying yesterday. The country is the second-largest producer after Saudi Arabia in the Organization of Petroleum Exporting Countries, which pumps about a third of the world’s crude.

IEF Holds Meeting

The global oil market is well-supplied and new discoveries are sufficient to replace depleting fields, the International Energy Forum’s secretary-general said. The worldwide oil industry needs annual investment of as much as $700 billion, Aldo Flores-Quiroga said in an interview in Kuwait today.

The International Energy Forum, consisting of a group of nations that account for more than 90 percent of global oil and gas supply and demand, will discuss oil-price volatility, renewable sources of energy and energy poverty in a two-day meeting in Kuwait that starts tomorrow. The IEF was founded in 1991 as a forum to discuss international energy security.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Jacob Adelman in Tokyo at jadelman1@bloomberg.net

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


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