Brent crude futures fell below $100 a barrel in London for the first time since July on concern that slowing economic growth will curb fuel demand, while supplies from the North Sea recover after oilfield maintenance.
Brent, used to price more than half of the world’s oil, declined as much as $1.73, or 1.7 percent, to $98.90 a barrel. The grade last traded below $100 on an intraday basis on July 12. West Texas Intermediate crude fell to a four-month low after reports showed manufacturing in the New York region expanded less than projected while China’s economic growth unexpectedly eased. Goldman Sachs Group Inc. dropped a recommendation to hold a “long” position in the S&P GSCI Brent Total Return Index, citing weakness in European demand for refined fuels and a slowdown in China.
“There is a level of confidence evaporating from the market” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “The market is starting to realize that without geopolitical events happening around the world that there is no reason to have a premium factored in.”
Brent for June settlement was down $1.56 at $99.07 a barrel on the London-based ICE Futures Europe exchange at 8:46 a.m. Singapore time. WTI for May delivery declined as much as $1.61 to $87.10 a barrel, the lowest since Dec. 17, on the New York Mercantile Exchange.
Goldman first made its recommendation to buy Brent in August. Holding the position would have resulted in a loss of almost 16 percent, the bank said in an e-mailed report yesterday.
The grade’s plunge brings prices in line with the target cited by Ali Al-Naimi, oil minister of Saudi Arabia, the world’s biggest oil exporter, who has warned that higher levels threaten the economic recovery. He described $100 as a “reasonable price” for consumers and producers in a March 18 speech in Hong Kong.
The decline follows a shift in the structure of North Sea prices starting early April that signaled supplies were beginning to outpace demand.
Front-month Brent futures traded at a discount to the next month yesterday, a structure known as contango, as North Sea production climbed with the end of oilfield maintenance and as refiners reduced their operations during a seasonal lull in demand.
Daily exports of North Sea Brent, Forties, Oseberg and Ekofisk crudes, which make up the Dated Brent benchmark, will increase by 1.5 percent in May to 893,548 barrels a day, loading programs obtained by Bloomberg News show.
European refiners will idle about 1.3 million barrels of daily capacity this month, curbing demand for crude, according to the International Energy Agency. The reduction is equivalent to 11 percent of the oil the region will process in April.
The IEA reduced its forecasts for global oil demand in 2013 for a third consecutive month on April 11, predicting the weakest consumption in Europe in almost three decades. One day earlier, OPEC reduced its own estimate for worldwide consumption.
China’s first-quarter gross domestic product gained 7.7 percent from a year earlier, the National Bureau of Statistics reported in Beijing yesterday. That’s less than the 8 percent forecast in a Bloomberg survey of economists and the 7.9 percent expansion in the fourth quarter.
China, U.S. Demand
The nation’s apparent oil demand in March grew 2.7 percent from a year earlier to 9.77 million barrels a day, according to statistics bureau data compiled by Bloomberg. That’s down from February’s 10.2 million and is the lowest level since October.
The Federal Reserve Bank of New York’s general economic index dropped to 3.1 this month from 9.2 in March. Readings exceeding zero signal expansion in New York, northern New Jersey and southern Connecticut.
The U.S. accounted for 21 percent of the world’s crude consumption in 2011 and China for 11 percent, according to BP Plc (BP/)’s Statistical Review of World Energy.
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