Oil Drops From Three-Day High as China Crude Consumption Falls

Oil dropped from the highest closing price in three days in New York after a report showed that Chinese consumption growth is slowing.

Futures slid as much as 1.2 percent as Chinese customs data showed the country’s apparent oil demand dropped to the lowest level since October. A separate report indicated Chinese manufacturing may shrink for a sixth month. Hedge funds and other money managers raised bullish bets on Brent crude, according to data from ICE Futures Europe exchange.

“Negative data from China is contributing to oil’s weakness today,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who correctly predicted Brent’s advance to $120 a barrel earlier this year. “Brent has slipped into a lower range.”

Crude for June delivery fell as much as $1.19 to $102.69 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.79 at 1:16 p.m. London time. The contract climbed 1.1 percent to $103.88 on April 20, the highest close since April 17. Prices are up 4 percent this year.

Brent oil for June settlement on the London-based ICE exchange was down 95 cents, or 0.8 percent, at $117.81 a barrel. The European benchmark contract was at a premium of $14.85 to New York futures, compared with $14.88 on April 20.

Slowing Growth

China’s apparent oil demand dropped to 9.51 million barrels a day in March, the lowest level since October, according to data compiled by Bloomberg based on customs data released today. The measure is calculated by adding production and net imports of oil products.

China accounted for 11 percent of the world’s oil consumption in 2010, compared with 21 percent for the U.S., according to BP Plc’s Statistical Review of World Energy. China raised retail gasoline and diesel prices last month, which the International Energy Agency said may reduce demand further.

“Traditionally strong second-quarter demand, with diesel demand supported by the spring ploughing season, should be restrained in the second quarter of this year,” the agency said in its monthly Oil Market Report on April 12.

Manufacturing may contract this month, according to a preliminary reading of a purchasing managers index for China by HSBC Holdings Plc and Markit Economics. It came in at 49.1 for April, compared with a final 48.3 in March. A number below 50 points to a contraction.

Bullish Bets

Hedge funds and other money managers raised bullish bets on Brent crude by 545 contracts in the week ended April 17, according to ICE data.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 122,884 lots, the London-based exchange said today in its weekly Commitment of Traders report.

Money managers, including hedge funds, commodity pools and commodity trading advisers, increased bullish oil wagers by 7,477, or 3.9 percent, to 199,304 futures and options combined in the seven days ended April 17, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report on April 20. That’s the first gain in five weeks.

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 on sev@bloomberg.net

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