Oil fell to the lowest level in two weeks as TransCanada Corp. (TRP) planned to restart the Keystone pipeline and on concern that world economic growth is slowing.
Prices dropped 1.5 percent as TransCanada said the pipeline will resume sending oil to the U.S. today after a two-day delay. Oil also slipped as Japan’s exports slid 10 percent in September and U.S. stocks tumbled to a five-week low after Caterpillar Inc. (CAT) forecast slower sales growth.
“The main reason why we are seeing a selloff in crude oil is Keystone,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “It will continue to keep the U.S. well-supplied and push prices down. Economic growth is slowing and that hurts demand.”
Crude for November delivery fell $1.32 to $88.73 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 3. The contract expires today. December futures slid $1.79, or 2 percent, to $88.65. Front-month futures are down 10 percent this year.
Brent for December settlement declined 70 cents, or 0.6 percent, to $109.44 on the London-based ICE Futures Europe exchange. Brent’s premium over New York futures widened for the first time in five days to $20.79.
Brent may decline as the Buzzard field in the North Sea resumes production, Hussein Allidina, Morgan Stanley’s head of commodities research, said in a note dated today.
The 590,000-barrel-a-day Keystone pipeline will resume today, James Millar, a company spokesman in Calgary, said in an e-mail. The company shut down Keystone on Oct. 17 after routine testing revealed an “anomaly” on the outside of the line. The Calgary-based company initially planned a resumption of operations on Oct. 20. Keystone moves oil from Canada to Cushing, Oklahoma, the delivery point for New York futures.
The U.S. imported 1.65 million barrels of oil a day into the Midwest, or Padd 2 region, in the week ended Oct. 12, according to the Energy Department. Most of the crude imported into the region comes from Canada, the largest U.S. source of foreign oil.
“It looks like Keystone will start shipping oil to the U.S. again and it’s bearish for the market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Crude stockpiles grew 2.86 million barrels in the week ended Oct. 12 to 369.2 million, the Energy Department said last week, the most for the second week in October since government records began in 1982. Inventories at Cushing dropped 140,000 barrels to 44 million.
The decrease in Japan’s exports was bigger than the 9.9 percent forecast by analysts polled by Bloomberg. Shipments to China, the nation’s largest export market, slid 14 percent from a year earlier. Exports to the European Union fell 21 percent, while those to the U.S. rose 0.9 percent.
“Japan’s export number is disappointing,” Flynn said.
Oil extended the three-day decline to 4.3 percent as Caterpillar, the world’s largest maker of construction and mining equipment, forecast 2013 growth that is the slowest in four years. Crude fell the most in two weeks on Oct. 19 after companies including Microsoft Corp. and General Electric Co. reported quarterly revenue that missed forecasts.
“Economic growth is the biggest concern now,” said Bill Baruch, senior market strategist at Iitrader.com in Chicago.
The Standard & Poor’s 500 Index dropped as much as 0.8 percent to 1,422.06, the lowest level since Sept. 6. The S&P’s GSCI Index of 24 commodities fell as much as 1.2 percent.
Hedge-fund managers and other large speculators increased their net-long position in crude futures in the week ended Oct. 16, according to Commodity Futures Trading Commission data.
Managed money bets that prices will rise, in futures and options combined, outnumbered short positions by 166,278 futures, the Washington-based regulator said in its weekly Commitments of Traders report. Net long positions rose by 5,274 contracts, or 3.3 percent, from a week earlier.
Electronic trading volume on the Nymex was 418,937 contracts as of 3:07 p.m. Volume totaled 627,850 contracts on Oct. 19, 19 percent above the three-month average. Open interest was 1.58 million.
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