Oil Falls From Two-Week High in New York on Bets That Recovery Is Too Slow

Oil dropped from a two-week high on speculation that the earlier price increase wasn’t supported by the pace of economic recovery.

Futures reached their highest price since May 11 earlier today after a U.S. Energy Department report yesterday showed that diesel and heating oil supplies fell to their lowest levels since April 2009. Inventories of gasoline increased by the most since February. U.S. government reports today showed that gross domestic product increased less than forecast in the first quarter and initial jobless claims unexpectedly rose last week.

“In the last weeks we’ve seen macroeconomic data worse than expected,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “The oil demand-supply situation is relaxed, and there’s no danger of any shortage.”

Crude for July delivery on the New York Mercantile Exchange fell as much as 84 cents, or 0.8 percent, to $100.48 a barrel and was at $101.08 at 1:42 p.m. London time. Brent crude for July settlement was at $114.75 a barrel after falling as much as 83 cents to $114.10 on the ICE Futures Europe exchange in London. The contract yesterday climbed $2.40, or 2.1 percent, to $114.93, the highest settlement since May 10.

The U.S. economy grew at a 1.8 percent annual rate in the first quarter, the Commerce Department said today, less than the 2.2 percent forecast in a Bloomberg survey, reflecting a smaller gain in consumer spending than previously calculated. Jobless claims increased by 10,000 to 424,000 in the week ended May 21, the Labor Department said. The median estimate of economists in a Bloomberg News survey called for a drop to 404,000.

Gasoline Stockpiles Grow

U.S. gasoline stockpiles increased 3.79 million barrels to 209.7 million, the biggest addition since February, the Energy Department said yesterday. They were forecast to rise 450,000 barrels, based on the median of 14 analyst estimates in a Bloomberg News survey. Gasoline use dropped 0.3 percent to 9.03 million barrels a day.

Crude oil supplies gained 616,000 barrels to 370.9 million. Stockpiles were forecast to decrease by 1.5 million barrels, according to the survey.

Distillate consumption was the highest since the week ended April 15, according to the Energy Department. Total fuel demand climbed 2.2 percent to 18.9 million barrels a day. Refineries operated at 86.3 percent of capacity, the most since Jan. 7.

Fibonacci Support

Oil in New York, heading for the first monthly decline since August, has rebounded from its Fibonacci support near $95 a barrel, a level based on weekly price swings over the past year, according to Stephanie Aymes, a cross-commodity technical analyst at Societe Generale SA. Crude will probably continue to trade “sideways” in coming weeks before climbing to $106, the next Fibonacci retracement level, she said.

Brent crude, the European benchmark contract, traded at a premium of $13.68 a barrel to U.S. futures, compared with $13.61 yesterday. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21. It averaged 76 cents last year.

Brent has advanced 21 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Iran and Syria. Yemen’s President Ali Abdullah Saleh said fighting could drag the country into civil war and warned that those who seek to disrupt security would be met with force.

The Organization of Petroleum Exporting Countries will leave production quotas unchanged at its June 8 meeting in Vienna because there is enough oil to meet demand, Iraq’s Deputy Prime Minister Hussain al-Shahristani said yesterday.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.