Bloomberg News

Oil Near Three-Month Low on Growth Concern, Stockpiles

May 10, 2012

Oil traded near the lowest price in more than three months after U.S. stockpiles climbed, Chinese crude imports fell and Europe’s debt crisis worsened.

Futures were little changed in New York after falling for six days. U.S. crude inventories rose 3.7 million barrels last week to 379.5 million, the highest level since 1990, even as fuel supplies shrank, Department of Energy data showed. China’s crude imports fell to the lowest in four months in April, while total goods exports rose at less than half the prior month’s rate. Greece struggled to form a government and the cost of insuring against a Spanish debt default increased to a record.

China’s trade slowdown “is symptomatic of ongoing nervousness around the world and in Europe in particular,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “That, in combination with larger inventory figures in the U.S., has got us in a downtrend.”

Crude for June delivery was at $96.65 a barrel, down 16 cents, in electronic trading on the New York Mercantile Exchange at 3:34 p.m. Singapore time. The contract yesterday slid 20 cents to $96.81, the lowest close since Feb. 2. Prices are 2.2 percent lower this year.

Brent oil for June settlement was at $113.08 a barrel, down 12 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $16.43, compared with $16.39 yesterday.

Technical Indicators

Oil’s decline in New York stalled after its 14-day relative strength index fell to 30, a reading that indicates further losses may not be sustained, according to data compiled by Bloomberg. Prices have yet to settle lower than the 200-day moving average after trading below that level the past three days, showing there is technical support. The indicator is around $96.28 a barrel today.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI, rose 1.16 million barrels to a record 44.1 million, according to the Department of Energy report.

Fuel inventories fell and refineries operated at 86.4 percent of capacity, the highest level since the week ended Dec. 2. Gasoline supplies slid 2.61 million barrels, more than three times the 750,000-barrel decrease forecast. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 3.25 million barrels.

Debt Crisis

China’s net crude imports slid to 22.21 million metric tons last month, or 5.4 million barrels a day, the lowest level since December, according to customs data released today. Refineries curbed purchases amid maintenance and factories’ demand for fuel faltered as China’s growth in goods exports slowed to 4.9 percent from 8.9 percent in March, missing economists’ estimates.

Oil’s decline this week is because of “a combination of factors,” said Diego Parrilla, chief investment officer at NARECO Advisors in Singapore. “The inventories play some part. It’s the general macroeconomic sentiment as the situation in Europe has deteriorated.”

China Investment Corp., the nation’s sovereign wealth fund, has stopped buying European government debt because of the crisis there, CIC President Gao Xiqing said yesterday in an interview in Addis Ababa, Ethiopia.

Credit-default swaps on Spanish debt rose 21 basis points to a record 520 yesterday, according to data compiled by Bloomberg. Greece’s political turmoil entered a fourth day with coalition talks deadlocked after elections failed to deliver a majority for any party.

The European Union accounted for 16 percent of the world’s oil consumption in 2010, according to BP Plc (BP/)’s Statistical Review of World Energy.

London’s oil futures market was busier than its New York counterpart for the first time in at least 17 years last month, reinforcing Brent crude’s ascendant role in setting global prices. Investors traded 11.3 million Brent futures on the ICE Futures Europe exchange in April, compared with 10.6 million West Texas Intermediate contracts, according to data compiled by Bloomberg.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net

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


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