Bloomberg News

Oil Drops From Five-Week High as U.S. Stockpiles Advance

May 02, 2012

Oil slid from the highest level in five weeks as increasing crude stockpiles in the U.S. and declining industrial output in Europe fanned concern that global demand may weaken.

Futures in New York dropped as much as 0.6 percent. U.S. crude inventories rose 2.04 million barrels last week, the fifth gain in six weeks, the American Petroleum Institute said yesterday. Euro-area manufacturing shrank for a ninth month in April, while France, Italy and Greece plan elections this weekend. Prices advanced 1.2 percent yesterday after an index of U.S. manufacturing increased at the fastest pace in 10 months.

“Concerns about Europe continue to weigh on risk,” Michael Hewson, a London-based analyst at CMC Market, which handles about $240 million a day in U.S. crude contracts, said today in an e-mailed response to questions. “There’s still a lot of uncertainty ahead of this weekend’s political events in France, Greece and Italy. Economic data continue to disappoint in Europe.”

Crude for June delivery declined as much as 62 cents to $105.54 a barrel in electronic trading on the New York Mercantile Exchange. It was at $105.84 at 1:30 p.m. London time. The contract yesterday gained $1.29 to $106.16, the highest close since March 27. Futures are up 7.1 percent this year.

Brent oil for June settlement on the London-based ICE Futures Europe exchange was down 57 cents at $119.09 a barrel. The European benchmark contract traded at a $13.32 premium to New York futures, compared with $13.31 yesterday, the narrowest gap based on closing prices since Jan. 31.

European Economy

Unemployment in countries that share the euro rose to the highest in almost 15 years, and manufacturing contracted for a ninth consecutive month, adding to signs the economy continues to weaken.

The jobless rate in the 17-nation euro area increased to 10.9 percent in March from 10.8 percent in February, the European Union’s statistics office in Luxembourg said today. That’s the highest since April 1997, when the rate reached a record at the time of 10.9 percent, according to data Bloomberg News has compiled since 1990. A gauge of manufacturing in Europe fell to 45.9 in April from 47.7 in March, Markit Economics said.

The European Central Bank will probably keep its benchmark interest rate at a record-low 1 percent tomorrow, according to all 58 economists in a Bloomberg survey. ECB President Mario Draghi said on April 25 that European leaders need to create a “growth compact” as spending cuts across the region damp activity and prompt a backlash among citizens.

Oil Supplies

U.S. crude supplies probably climbed to 375.5 million barrels in the week ended April 27, the highest in more than 21 years, according to the median estimate of 11 analysts surveyed by Bloomberg News. The Energy Department will release its weekly report at 10:30 a.m. in Washington today.

Gasoline inventories are expected to have fallen 1.5 million barrels, extending a 10-week run of declines, the survey showed. The API yesterday said supplies decreased 3.9 million barrels.

Gasoline futures for June delivery were up 0.07 percent at $3.0976 a gallon in New York, after losing 2.7 percent yesterday, the most since Feb. 28.

The Institute for Supply Management’s factory index climbed to 54.8 last month, according to the Tempe, Arizona-based group’s report yesterday. The reading exceeded the most optimistic forecast of 79 economists surveyed by Bloomberg and was the highest since June. Readings greater than 50 signal growth.

China’s Factories

A Chinese manufacturing index rose in April, signaling that a rebound in the world’s second-biggest economy may help to offset constraints on global growth from austerity measures in Europe.

The 49.3 final reading of a purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a preliminary 49.1 reported on April 23 and a final 48.3 in March. A separate index released yesterday by China’s statistics bureau and logistics federation was at 53.3, indicating the fastest growth in a year.

“China data are still in contraction territory on HSBC measure, which continues to paint a mixed picture,” Hewson said.

To contact the reporter on this story: Sherry Su in London at lsu23@bloomberg.net

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


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