Bloomberg News

Oil Little Changed on Slower Manufacturing as Stocks Rise

April 23, 2013

West Texas Intermediate crude was little changed as data from China and Europe signaled a slowdown in global manufacturing and equities climbed for a third day.

Oil slipped 1 cent as China’s preliminary manufacturing data for April showed growth was less than in March. Euro-area output shrank for a 15th month. U.S. oil supplies rose to the most since 1990 last week in a Bloomberg survey before a government report tomorrow. Equities advanced on better-than- expected corporate earnings and U.S. new-home sales. Crude briefly extended losses as stocks pared gains just after 1 p.m. in New York on a false report of a bombing at the White House.

“The Europe and China numbers are rather weak,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The equities definitely helped oil today but I do think we will continue to go lower. We had that blip due to the false White House headline. It looked like there was some high-frequency trading going on.”

West Texas Intermediate for June delivery settled at $89.18 a barrel on the New York Mercantile Exchange. Prices have dropped 8.3 percent this month and 2.9 percent this year. The volume of all futures traded was 19 percent above the 100-day average for the time of day at 5:14 p.m.

Prices rose after the American Petroleum Institute reported U.S. oil inventories decreased 845,000 barrels last week to 383.2 million. The June contract gained 37 cents to $89.56 a barrel in electronic trading at 5:14 p.m. It was $89.32 before the report was released at 4:30 p.m.

Brent for June settlement fell 8 cents to end the session at $100.31 a barrel on the ICE Futures Europe exchange. The volume of all contracts traded was 3.4 percent above the 100-day average.

Chinese Manufacturing

“The manufacturing numbers were really what hurt the market,” said Bill Baruch, a senior market strategist at commodities trading firm Iitrader.com in Chicago. “Some of the earlier pressure has been relieved.”

The preliminary reading of 50.5 for a Purchasing Managers’ Index in China released by HSBC Holdings Plc and Markit Economics compared with a final 51.6 for March. The number was also below the median 51.5 estimate in a Bloomberg survey of 11 analysts.

Brent Forecast

Goldman Sachs Group Inc. (GS:US) cut its 2013 Brent price forecast to $105 from $110 in a report today by analysts including Jeffrey Currie in New York. They highlighted the increased risk that Chinese demand growth will remain weak in the near-term.

The International Energy Agency and the Organization of Petroleum Exporting Countries reduced their 2013 global oil- consumption estimates earlier this month.

“China gives more downside risk to these demand forecasts,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending.

In Europe, a composite index based on a survey of purchasing managers in the services and manufacturing industries held at 46.5 this month, London-based Markit said. A reading below 50 indicates contraction.

“We’ve got some disappointing manufacturing data out of both China and Europe and the market is under pressure,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market is moving back and forth based on changing economic perceptions.”

The European Union and China combined used 27 percent of the world’s oil in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. consumed 21 percent.

U.S. Supplies

U.S. oil inventories probably rose to the highest level in more than 22 years last week, according to a Bloomberg survey before an Energy Information Administration report tomorrow.

Stockpiles probably grew by 2 million barrels to 389.6 million last week, the highest level since July 1990, according to the median estimate of 11 analysts in the survey. The EIA, the Energy Department’s statistical arm, is scheduled to release the weekly report at 10:30 a.m. tomorrow in Washington.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA for its weekly survey.

WTI dropped to $88.29 at 1:10 p.m. from $88.87 less than a minute earlier as U.S. equities erased gains following a post on Twitter from the Associated Press saying that there had been explosions at the White House. The AP said its Twitter account had been hacked and there was no explosion. The contract rebounded to $89.14 at 1:13 p.m.

False Report

“Oil went straight down with stocks on rumors that there was a bomb at the White House,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.

The Standard & Poor’s 500 index gained 1 percent to 1,578.78, the strongest level since April 12. The index closed at a record high of 1,593.37 on April 11. The benchmark equity gauge briefly dipped as low as 1,563 following the Twitter post.

Sales of single-family properties climbed 1.5 percent last month in the U.S. to a 417,000 annual pace, the Commerce Department reported today in Washington. The median estimate of 76 economists surveyed by Bloomberg called for March sales to rise to 416,000.

Implied volatility for at-the-money WTI options expiring in June was 22.7 percent, compared with yesterday’s 23.9 percent.

Electronic trading volume on the Nymex was 581,288 contracts as of 5:14 p.m. It totaled 447,940 contracts yesterday, 24 percent below the three-month average. Open interest was 1.73 million contracts.

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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