West Texas Intermediate crude fell for a second day following slower-than-expected economic data from China and Chairman Ben S. Bernanke saying the Federal Reserve may start reducing bond purchases later this year.
Futures slid as much as 2.3 percent. A preliminary reading of China’s Purchasing Manager’s Index for June dropped to 48.3, compared with the 49.1 median estimate in a Bloomberg News survey of 15 economists. The Fed may begin tapering bond purchases this year and end them in 2014 should the economy continue to improve, Bernanke said in Washington. U.S. crude inventories rose by 313,000 barrels last week, the Energy Information Administration said yesterday.
“It’s not surprising that oil is lower when you look at the rubbish Chinese PMI data from last night,” Michael Hewson, a London-based market analyst for CMC Markets Plc, said by phone today. “Added to that you have Mr. Bernanke’s stimulus withdrawal that may affect growth in the U.S., and these two factors are enough to pull down prices.”
WTI for July delivery, which expires today, dropped as much as $2.24 to $96 a barrel in electronic trading on the New York Mercantile Exchange. The volume of all futures traded was 134 percent above the 100-day average. Prices fell 20 cents to $98.24 yesterday. The more actively traded August contract was down $1.57 at $96.91 as of 1:25 p.m. London time.
Brent for August settlement on the London-based ICE Futures Europe exchange lost as much as $2.29, or 2.2 percent, to $103.83 a barrel. The European benchmark grade was at a premium of $7.33 to WTI, compared with $7.64 yesterday.
The preliminary Purchasing Managers’ Index for China released today by HSBC Holdings Plc and Markit Economics will be the lowest since September if confirmed on July 1 in the final reading. May’s gauge of 49.2 was the first below 50 since October, signaling contraction.
The Federal Open Market Committee left the monthly pace of bond purchases unchanged at $85 billion, while saying that “downside risks to the outlook for the economy and the labor market” have diminished. Policy makers raised their growth forecasts for next year to a range of 3 percent to 3.5 percent and reduced their outlook for unemployment.
“The change in policy from the Fed and rising supplies are weighing on the market,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “The Fed tapering implies that the economy is going well and that demand will be there. When you look at what inventories are actually doing, it’s not that good.”
U.S. gasoline inventories climbed by 183,000 barrels in the week ended June 14, said the EIA, the Energy Department’s statistical arm. Supplies were projected to gain by 750,000 barrels, according to the median estimate of 12 analysts surveyed by Bloomberg. Distillate-fuel stockpiles, including heating oil and diesel, fell by 489,000 barrels, compared with a forecast 925,000-barrel advance in the survey.
Crude inventories at Cushing, Oklahoma, the delivery point for WTI contracts and the biggest U.S. oil-storage hub, dropped by 669,000 barrels to 48.6 million, the lowest since December, according to the EIA. Supplies slid for a third week, the longest run of declines since September.
U.S. Secretary of State John Kerry plans to meet this weekend with European and Middle Eastern allies to discuss what weapons to provide Syrian rebels, who face an imminent offensive by regime troops in Aleppo and the Damascus suburbs.
The meeting, to be held June 22 in Doha, is expected to include officials from France, the U.K., Italy, Saudi Arabia, Turkey, Qatar, Egypt, and Jordan, according to French officials, who spoke about the meeting with reporters on the condition that they not be identified.
Brent is falling after futures failed to breach a technical-resistance level, according to data compiled by Bloomberg. The front-month contract traded yesterday above its 30-day upper Bollinger Band for a third day without settling above it. This indicator is at about $106.20 a barrel today. Sell orders tend to be clustered near chart resistance.
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