Brent Crude Drops a Second Day as Global Supplies Climb

Brent crude fell for a second day after OPEC’s production increased to a five-month high and an industry group said U.S. stockpiles climbed for the first time in three weeks.

Futures slid as much as 1.8 percent in London after dropping 1.4 percent yesterday. U.S. crude inventories rose by 5.2 million barrels last week, the American Petroleum Institute said. Government figures today are projected to show a gain of 1.1 million barrels, according to a Bloomberg News survey. Daily output by the Organization of Petroleum Exporting Countries increased in April by 194,000 barrels a day, a separate survey indicated. An index of manufacturing in China signaled weaker expansion in April.

“With inventories at the levels they are at, it is a question of how much demand there is, and there is growing evidence of a slowdown in economic activity with even China weaker than expected,” Michael Hewson, a market analyst at CMC Markets Plc in London, said today by telephone. “The direction of travel on oil is down, and I see no reason to change that view unless OPEC cuts production.”

Brent for June settlement slid as much as $1.83 to $100.54 a barrel on the London-based ICE Futures Europe exchange, the lowest intra-day level in a week, and was at $100.58 at 1:21 p.m. local time. Futures fell $1.44 to $102.37 yesterday, capping a 7 percent drop for April. Trading was 2 percent above the 100-day average for the time of day. Prices are down 9.5 percent this year.

Cushing Supplies

West Texas Intermediate for June delivery declined as much as $1.79 to $91.67 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.81 at the same time today. Front-month Brent was at a premium of $8.73 to WTI, the narrowest gap since Dec. 30, 2011.

While total U.S. crude stockpiles rose last week, supplies at Cushing, Oklahoma, the delivery point for New York-traded futures, decreased by 1.4 million barrels, the API data showed. Gasoline inventories shrank by 2.7 million barrels. The Energy Information Administration report today may show they declined by 900,000 barrels, according to the median estimate of 11 analysts in the Bloomberg survey.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.

Saudi Output

OPEC pumped 30.9 million barrels a day of crude last month, a survey of oil companies and industry analysts showed. Saudi Arabia, the group’s biggest producer, increased daily output by 80,000 barrels to 9.18 million. Kuwait and the United Arab Emirates also boosted production by 80,000 barrels a day each.

Output by Iran, which is under Western sanctions on its energy exports because of its nuclear program, dropped by 150,000 to 2.55 million barrels a day, the lowest level since February 1990.

Saudi Arabia intends to maintain its production capacity at 12.5 million barrels a day, Oil Minister Ali al-Naimi said yesterday at the Center for Strategic & International Studies in Washington. Prince Turki Al Faisal, a former head of intelligence, said on April 25 at Harvard University that the kingdom plans to raise capacity to 15 million barrels a day by 2020, according to a copy of his speech posted on the university website April 29.

China Manufacturing

Oil extended declines after China’s Purchasing Managers’ Index showed manufacturing expanded at a weaker pace last month. The gauge fell to 50.6, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compared with the 50.7 median forecast of 31 analysts in a Bloomberg News survey and a March reading of 50.9. The nation is the world’s second-biggest oil consumer.

“We’re seeing some weakness, and clearly the inventory numbers have put some weight on the market,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “There are some jitters around the China growth story.”

WTI may tumble below $80 a barrel if it fails to rise above $100, according to technical analysis by Piper Jaffray Cos. The contract is trading above the moving averages for the last 10, 50 and 200 days, a signal to buy, said Craig Johnson, technical market strategist with the company in Minneapolis. If crude fails to settle above $100, market sentiment will turn bearish, he said. WTI last breached that level in September on an intraday basis and in May 2012 at settlement.

To contact the reporter on this story: Rupert Rowling in London at rrowling@bloomberg.net

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

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