Oil Pares Weekly Gain as China, IEA Signal Slower Growth

Oil fell the most in six days, paring its weekly gain, as a collapse in China’s export growth signaled the global economy is weakening and the International Energy Agency said demand expansion is slowing.

Futures fell as much as 1.6 percent in New York after the customs bureau in Beijing said today that China’s net oil imports shrank to the lowest level this year. The bureau also said outbound shipments of all goods increased 1 percent in July from a year earlier, compared with an 8 percent median estimate in a Bloomberg survey of analysts. The Paris-based IEA cut global oil demand forecasts for this year and next.

“Most of the drop in oil prices today come from macro figures in China,” Thina Saltvedt, an analyst at Nordea Bank AB, said by phone from Oslo. “It started with China and then the IEA. That just added to the gloomy picture.”

Oil for September delivery dropped as much as $1.47, the most since Aug. 2, to $91.89 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $91.98 at 1:24 p.m. London time. Prices are up 0.5 percent this week.

Brent crude for September settlement fell $1.70 to $111.51 a barrel on the London-based ICE Futures Europe exchange after advancing 1 percent yesterday. The European benchmark’s premium to West Texas Intermediate was $19.59, compared with $19.86 yesterday, the widest gap since April.

“The Brent premium is related to the Middle East,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. in Tokyo. “People are worrying about geopolitical risk.”

China Oil Imports

In China, net crude imports were 21.6 million metric tons, according to data released on the website of the Beijing-based General Administration of Customs. That’s the equivalent of 5.1 million barrels a day, the least since December 2011.

“China is a major importer of oil, and when that country slows, there’s going to be a negative effect,” said Madhavi Mehta, an energy analyst at Kotak Commodity Services Ltd. in Mumbai. “This isn’t just a blip. The sentiment may be weak in the market because the economy isn’t picking up.”

The country’s July exports of all goods increased 1 percent from a year earlier, compared with 11 percent growth in June. A report yesterday showed growth in Chinese industrial output is also slowing.

The IEA, which last month had predicted a faster rate of demand growth for next year, now estimates that world oil use will decelerate to 800,000 barrels a day, or 0.9 percent, in 2013 from 900,000 a day, or 1 percent, this year.

Consumption Drops

Global consumption will average 90.5 million barrels a day next year, or 400,000 a day less than estimated last month as a result of revisions to data since 2010, the IEA’s monthly oil market report showed today.

Crude prices may rise in New York next week as refineries operate near the highest level in five years and as tension in the Middle East raises concern that supply may be disrupted, a Bloomberg survey showed.

Ten of 21 analysts and traders, or 48 percent, forecast crude prices will advance through Aug. 17. Eight respondents predicted a decline and three expect little change. Narrow differences in the daily opening and closing levels of WTI crude signal that oil is losing momentum and is poised to drop, according to technical analysis by Barclays Plc.

Iran Sanctions, Sudan

International sanctions against Iran have reduced exports from the Persian Gulf nation more than previously forecast, Goldman Sachs Group Inc. said in a report e-mailed today. There is a shortfall of 1.4 million barrels a day from Iran that “substantially exceeds” the bank’s estimates, it said.

While the possible resumption of exports from South Sudan might partly offset that shortage, it’s unclear when supply from the African country will resume, according to the report.

Output from Sudan and South Sudan is forecast to average 60,000 barrels a day in the fourth quarter, and 130,000 barrels next year, compared with about 450,000 last year, the IEA said. Restarting could take six months or even longer, it said.

Saudi Arabia, the world’s biggest crude exporter, pumped 10 million barrels a day in July, the IEA said. Iraq’s crude output rose above 3 million barrels a day last month, and topped that of Iran, the agency said. A report yesterday by the Organization of Petroleum Exporting Countries showed the same switch in rankings.

Tropical Depression Seven was about 930 miles (1,500 kilometers) east of the Windward Islands with winds of 35 miles per hour, the National Hurricane Center said in a 5 a.m. Atlantic time advisory. Ernesto, formerly a hurricane, weakened to a tropical depression as it dissipated over the mountains of southern Mexico today.

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net

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

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