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Oil Trades Below $90 A Barrel A Third Day On Supply Gain

By on July 25, 2012

Oil traded below $90 a barrel for a third day in New York after an industry report showed crude stockpiles increased for the first time in four weeks in the U.S., the world’s biggest consumer of the commodity.

Futures slid as much as 0.7 percent after the American Petroleum Institute said supplies rose 1.35 million barrels last week. An Energy Department report today may show they shrank 1 million barrels, according to a Bloomberg News survey before the API data. Prices pared their decline after China, the second- biggest crude user, said its slowdown in industrial activity may be stabilizing.

“Given the background of reduced confidence, rising inventories can be a reflection of sluggish demand,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “What’s happening in China is a key component for people’s demand outlook for oil. On the one hand, it can be encouraging that things are stabilizing a bit but statements that things are stabilizing may be taken as a sign that stimulus measures may not be too aggressive.”

Oil for September delivery slid as much as 65 cents to $87.85 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.16 at 1:11 p.m. Singapore time. The contract yesterday climbed 0.4 percent to $88.50, the highest close since July 20. Prices are 11 percent lower this year.

Brent crude for September settlement was at $103.04 a barrel, down 38 cents, on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $14.88, from $14.92 yesterday.

Fuel Stockpiles

Oil in New York has technical support at $86.25 a barrel, along the lower of two so-called leading span lines that define an “ichimoku cloud” on the daily chart, according to data compiled by Bloomberg. The cloud is an area where buy orders tend to be clustered. Last week’s price increase stalled near the upper boundary, signaling chart resistance.

U.S. gasoline inventories increased 2.35 million barrels last week, according to the API. The Energy Department report today may show supplies shrank 1 million barrels, according to the median estimate of 11 analysts in the Bloomberg survey.

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 Energy Department for its weekly survey.

U.S. fuel consumption last week was 4.4 percent below the year-earlier level, according toMasterCard Inc. (MA)’s SpendingPulse report yesterday. That’s the 47th straight drop in the measure. Year-to-date gasoline demand is 4.6 percent below 2011, the data showed.

Chinese Economy

China sees “obvious” signs of stabilization in its industrial-output growth and the fundamentals are still sound, Zhu Hongren, a spokesman at the Ministry of Industry and Information Technology, said at a briefing in Beijing today.

The nation’s economy is bottoming out now and likely to have a “slight improvement” this quarter, Markus Rodlauer, head of the International Monetary Fund’s China team, said in a Bloomberg Television interview. The Washington-based IMF said separately in a statement that China faces significant downside risks.

Goldman Sachs Group Inc. reiterated its recommendation to buy September WTI futures, citing a “tightening balance” in physical oil markets amid sanctions on Iran. The trade, first recommended in February, has so far returned a loss of $19.41 a barrel, Goldman said in a report e-mailed today.

Iran Talks

Iranian and European Union officials met yesterday to prepare for another possible round of talks on the nuclear program that has prompted the sanctions against the second- biggest crude producer in the Organization of Petroleum Exporting Countries.

The meeting in Istanbul was between Helga Schmid, deputy head of the EU’s foreign relations arm, and Ali Bagheri, the Iranian deputy negotiator on the nuclear issue. It will be followed by contact between EU foreign policy chief Catherine Ashton and Saeed Jalili, Iran’s chief negotiator, Ashton’s office said, without giving details of the talks.

The U.S. and its allies have raised concerns that Iran is concealing a nuclear-weapons program, a charge the Persian Gulf nation rejects. The EU has imposed an oil embargo against the country, while the U.S. has implemented financial and trade sanctions. Iran produced 3.2 million barrels a day of crude in June, according to analysts’ estimates compiled by Bloomberg.Saudi Arabia had output of 9.8 million a day.