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Oil Drops From One-Week High on Speculation Crude Demand to Slow

By on September 7, 2012

Oil fell from the highest close in almost a week as investors speculated prices may have risen too far before a report forecast to show jobs growth slowed last month in the U.S., the world’s biggest crude consumer.

Futures slid as much as 1 percent, declining for the first time in three days and heading for the first weekly drop in six weeks. U.S. employment probably rose by 130,000 in August after gaining 163,000 in July, according to a Bloomberg News survey before a Labor Department report today. West Texas Intermediate has technical resistance along its 200-day moving average, at $96.61 a barrel, according to data compiled by Bloomberg.

“Oil has now arrived at a situation where prices are probably fairly well priced,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It doesn’t seem likely that we’re going to see a situation where we will see significant growth in oil demand in coming months.”

Crude for October delivery declined as much as 98 cents to $94.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.18 at 2:04 p.m. Singapore time. The contract climbed 17 cents yesterday to $95.53, the highest close since Aug. 31. Front-month prices are down 1.3 percent this week and 3.6 percent this year.

Brent oil for October settlement decreased 18 cents, or 0.2 percent, to $113.31 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was at $18.13, up from $17.96 yesterday.

Moving Average

Futures in New York have halted their advance near their 200-day moving average the past week. Sell orders tend to be clustered close to chart-resistance levels. Oil also settled below an upward-sloping trend channel for a second day yesterday, confirming a breach of technical support, according to data compiled by Bloomberg. This channel started from $77.28 a barrel, the 2012 intraday low on June 28, and marks where futures rebounded in early August.

Consumer confidence in the U.S. stayed near an eight-month low last week, according to the Bloomberg Consumer Comfort Index. The measure was at minus 46.5 in the period ended Sept. 2. That’s the fifth consecutive week it was lower than minus 40, a level typically associated with severe economic discontent. Reports in the past seven days showed manufacturing shrinking in the U.S., China and the euro area. The three regions accounted for almost half of the world’s oil consumption last year, according to BP Plc (BP/)’s Statistical Review of World Energy.

Fuel Supplies

“If you take into account the general weakness in the economies then oil should come under pressure,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney, who predicts New York crude has support at $94.50 a barrel.

Prices rose yesterday after an Energy Department report showed U.S. crude stockpiles fell 7.4 million barrels last week to the lowest level in five months and the European Central Bankannounced a bond-buying plan to ease the region’s debt crisis.

U.S. gasoline inventories dropped 2.3 million barrels, according to the report. They were forecast to slip by 3 million, according to the median estimate of 12 analysts in a Bloomberg News survey. Distillate stockpiles, a category that includes heating oil and diesel, rose 993,000 barrels last week compared with projected decline of 1.55 million.


Source: Bloomberg