Crude Declines on Signs of Slowing Fuel Demand in U.S., China
Crude oil tumbled to the lowest price in more than a week after the Labor Department reported the productivity of U.S. workers fell in the second quarter, a sign the economy is struggling to recover.
Oil dropped 1.5 percent as the department said the world’s largest economy lost momentum heading into the second year of the recovery from the recession. Crude pared losses after Federal Reserve policy makers announced their first attempt to bolster growth since March 2009.
The productivity report “is not good news and, if anything, suggests that the recession will be longer, not shorter,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Crude oil for September delivery fell $1.23 to settle at $80.25 a barrel on the New York Mercantile Exchange, the lowest price since July 30. Oil has risen 14 percent in the past year.
Prices were little changed from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 2.19 million barrels to 352.7 million, the lowest level in five weeks. September oil fell $1.31, or 1.6 percent, to $80.17 a barrel in electronic trading at 4:32 p.m.
The Labor Department’s measure of employee output per hour decreased at a 0.9 percent annual rate, the first drop since the end of 2008. The median forecast of economists surveyed by Bloomberg News projected a 0.1 percent gain.
Fed Decision
The Fed decided to maintain its holdings of securities to prevent money from being drained out of the financial system and to keep the slowing U.S. economy from relapsing into recession. The central bank said it will reinvest principal payments on its mortgage holdings into long-term Treasury securities.
“The Fed decided to do some things to help the economy,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “Obviously, the market didn’t think it was enough, so we’re still in negative territory.”
The U.S. is the world’s largest oil consumer and it’s the second-largest energy user after China.
China’s crude imports slumped 15 percent to 18.8 million metric tons in July from a record 22.1 million in June, according to data today from the General Administration of Customs.
“This morning, the focus was on the fact that the China numbers were terrible and the productivity numbers weren’t good,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This is a reminder that you can’t put all your eggs in the China basket and expect it’s going to drive demand every day.”
Price Forecast
The Energy Department increased its crude-oil price forecast for 2010 to an average $79.13 a barrel from $78.69 in July, according to its monthly Short-Term Energy Outlook, released today. The department raised its estimate for global oil consumption this year to 85.91 million barrels a day from 85.82 million last month.
U.S. equities fell, as a late-day rally on the Fed plan wasn’t enough to overcome concern the recovery is faltering. The Standard & Poor’s 500 Index decreased 0.6 percent to 1,121.06. The Dow Jones Industrial Average lost 54.5 points, or 0.5 percent, to 10,644.25.
A weather system in the southeastern Gulf of Mexico has a 70 percent chance of becoming a tropical storm in the next 48 hours, according to a U.S. National Hurricane Center forecast at 2 p.m. Miami time. Watches and warnings for the northern Gulf could be required as early as this afternoon, it said.
Low Pressure System
The low pressure system was about 100 miles (161 kilometers) west of the southwest coast of Florida. BP Plc suspended drilling on a relief well in the Gulf to permanently seal the site of the worst oil spill in U.S. history.
About 31 percent of U.S. oil output comes from the Gulf. The area is home to 43 percent of operable refining capacity and seven of the country’s 10 busiest ports.
An Energy Department report tomorrow is likely to show that crude stockpiles in the U.S. declined 2 million barrels last week from 358 million the prior week, according to the median forecast in a Bloomberg News survey of 18 analysts. Seventeen estimated supplies fell, and one said they gained.
Refineries probably ran at 90.7 percent, down 0.5 percentage point from the prior week, according to the survey.
Gasoline inventories increased for a seventh consecutive week, rising 250,000 barrels from 223 million, according to the survey. That would be the highest level since the week ended April 30.
Gasoline Demand
U.S. gasoline demand fell 1.6 percent to an average 9.42 million barrels of fuel a day in the week ended Aug. 6, the first decline in a month, MasterCard Inc. said today in its SpendingPulse report.
Brent crude oil for September settlement fell $1.39, or 1.7 percent, to $79.60 a barrel on the London-based ICE Futures669VBYPYCGHE&peplid=5852523&pepllastname=Link&peplfirstname=Joseph&peplcompanyname=Bloomberg_News&peplcompanynumber=603036&peplwhohits=10000&pepltitle=No_Title_Info&interviewstatus=0&interviewdate=2010-08-10_16_11_14&interviewreporterpepl=0&intervieweditorpepl=5852523&intervieweditoremail=jlink1@bloomberg.net&interviewsource=News_Reporter_Software&srange=8937&erange=8945">Joe Link, Bill Banker
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Rate this Page