Bloomberg News

Oil Heads for Fourth Weekly Decline; Iran Talks End Witho

May 25, 2012

Oil headed for a fourth weekly decline, the longest losing streak since August, amid concern that an economic slowdown in China will curb fuel demand in the world’s second-largest crude user.

Futures were little changed after sliding as much as 0.5 percent. China’s biggest lenders may miss loan targets for the first time in at least seven years, according to three bank officials with knowledge of the matter. Oil prices may slip next week as the global economy slows amid rising U.S. supplies, a Bloomberg News survey showed. Iran, OPEC’s second-biggest crude producer, and world powers will meet again in June after they were unable to negotiate a deal on the nation’s nuclear program.

“The market is one of comfortable supplies and an uncertain demand outlook,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said in a telephone interview today. “The risk is to the downside in terms of price if we see more reason to wind back the Iran premium.”

Crude for July delivery was at $90.82 a barrel, up 16 cents, in electronic trading on the New York Mercantile Exchange at 3:47 p.m. Sydney time. The contract yesterday increased 0.9 percent to $90.66. Prices are down 0.7 percent this week and 8.1 percent this year.

Brent oil for July settlement rose 1 cent to $106.56 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $15.74, from $15.89 yesterday.

Moving Average

Oil may extend its decline in New York as an indicator of long-term technical momentum has turned negative, according to data compiled by Bloomberg. On the weekly chart, the moving average convergence-divergence line is below zero for the first time since November. Crude has technical support at $89.93 a barrel, the 50 percent Fibonacci retracement of the slide to $32.40 in December 2008 from an intraday record high of $147.27 in July that year.

Twenty of 37 analysts, or 54 percent, forecast oil will drop through June 1, the Bloomberg survey showed. Ten respondents, or 27 percent, predicted an increase and seven estimated prices will be little changed.

The drying up of loan demand attests to the severity of China’s slowdown. The economy may grow in 2012 at its slowest pace in 13 years, a Bloomberg News survey showed last week. Stockpiles of crude in the U.S., the world’s biggest oil consumer, climbed 883,000 barrels to 382.5 million barrels, the highest level since August 1990, according to a May 23 Energy Department report.

Iran Talks

Chinese, French, German, Russian, British and U.S. negotiators will meet their Iranian counterparts for a third time this year on June 18 to June 19 in Moscow, according to Catherine Ashton, the European Union’s foreign policy chief. Iran went into two days of negotiations in Baghdad that ended yesterday seeking relief from financial, trade, insurance and energy-related sanctions imposed by the West to curb the country’s nuclear program.

The Persian Gulf nation has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s crude, in response to an embargo. It produced an average of 3.3 million barrels a day of oil in April, according to estimates compiled by Bloomberg. Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, pumped 9.8 million a day.

The New York Mercantile Exchange cut the margin requirement on its crude and gasoline futures effective at the close of business May 29, according to CME Group Inc., the exchange’s parent company. Initial margins for speculators for Nymex light sweet crude will fall 9.8 percent to $6,210 per contract, according to the notice. Margins for gasoline will decrease 8.3 percent to $7,425.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

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


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