Oil Heads for Weekly Decline as Economy Counters Mideast Tension
Oil headed for the fourth weekly decline in five in New York as signs of a slowing economy in the U.S., the world’s biggest crude user, countered concern that tension in the Middle East will disrupt supplies.
West Texas Intermediate futures were little changed after falling 1 percent yesterday as a report showed U.S. unemployment claims climbed to the highest level since April 2011. Crude stockpiles grew last week to the highest since July as output rose to an 18-year high, according to the Energy Department. Oil pared losses after Israel said it’s ready to escalate military operations against Gaza.
“Supplies are overwhelming while demand is non-existent,” said Andrey Kryuchenkov, a London-based analyst at VTB Capital who predicts WTI may slip to $84 a barrel this month. “Geopolitical risks are hopefully going to subside, and so ultimately macroeconomic and demand concerns will still dominate the agenda.”
WTI for December delivery, which expires today, slipped 15 cents to $85.30 a barrel in electronic trading on the New York Mercantile Exchange at 12:28 p.m. London time. The January contract dropped 14 cents to $85.73. The front-month future dropped 87 cents yesterday to $85.45 and is down 0.9 percent this week. Prices have retreated 14 percent this year.
Brent for January settlement on the London-based ICE Futures Europe exchange rose 28 cents to $108.27 a barrel. The front-month European benchmark grade was at premium of $22.55 to the corresponding WTI contract, from $25.53 yesterday.
Oil in New York remains in a downtrend channel on the daily chart, signaling price advances may not be sustainable, compiled by Bloomberg show. Futures have traded between the middle and lower Bollinger Bands for almost two months. These indicators, representing technical resistance and support levels respectively, are around $87.80 and $82.30 a barrel today.
U.S. crude stockpiles rose 1.09 million barrels last week to 375.9 million, the Energy Department reported. Oil output gained for a 10th week to 6.71 million barrels a day, the most since May 1994.
Gasoline inventories fell 440,000 barrels, the data show. Distillate supplies, a category that includes heating oil and diesel, declined 2.5 million barrels, according to the department.
Applications for jobless benefits surged by 78,000 to 439,000 in the week ended Nov. 10, according to data from the U.S. Labor Department yesterday.
Oil may fall next week amid concern that weakening economic growth will reduce fuel demand and boost inventories, a Bloomberg survey showed. Sixteen of 33 analysts and traders, or 48 percent, forecast crude will decrease through Nov. 23. Thirteen respondents, or 39 percent, predicted a gain. Four forecast little change.
Air-raid sirens sounded for a second day in Tel Aviv and an explosion was heard in the city as Israel extended its bombing of Gaza and militant groups fired rockets at the Jewish state.
Egypt’s prime minister, Hisham Qandil, visited Gaza today and called for an international effort to end the violence there. Israel’s army said it has deployed tanks near the Gaza border and called up reservists.
A long-range missile attack on Tel Aviv yesterday by Palestinian militants in Gaza “is an escalation and there will be a price to pay,” Ehud Barak, Israel’s defense minister, said on Channel 2 television.
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