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WTI Falls for Third Time in Four Days on World Bank Cuts

West Texas Intermediate crude fell for the third time in four days as speculation that fuel demand will decline outweighed concern that Middle Eastern exports may be disrupted by political unrest.

Futures slid as much as 0.9 percent after the World Bank yesterday cut its forecast for global economic growth. Presidential elections will be held tomorrow in Iran, holder of the world’s fourth-largest oil reserves. Protesters returned to Istanbul’s Taksim Square a day after Turkish police used tear gas and water cannons to halt two weeks of anti-government demonstrations. U.S. crude stockpiles rose last week, government data showed.

“Investor sentiment is mixed between hopes for the economic recovery on the one hand and disappointing economic data on the other,” said Hans van Cleef, energy economist at ABN Amro Bank in Amsterdam. “Economic growth will increase somewhat in the second half, but nonetheless it will remain very modest and that will keep a lid on oil prices,”

WTI for July delivery dropped as much as 86 cents to $95.02 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.50 at 10:40 a.m. London time. The volume of all futures traded was 13 percent below the 100-day average. The contract climbed 50 cents to $95.88 yesterday, the highest settlement since June 7.

Brent for July settlement, which expires today, declined as much as 74 cents, or 0.7 percent, to $102.75 a barrel on the London-based ICE Futures Europe exchange. The more actively traded August future was down 32 cents at $103.24. The European benchmark grade was at a premium of $7.63 to WTI for the same month, from $7.61 yesterday.

Demand Outlook

The global economy will expand 2.2 percent this year, down from a January projection of 2.4 percent, the World Bank said in a report released in Washington. The bank lowered its outlook for developing economies and estimated the euro region’s gross domestic product will shrink 0.6 percent. It increased forecasts for the U.S. and Japan.

Demand for oil from the Organization of Petroleum Exporting Countries in the second half of the year will be weaker than earlier projections amid signs of slowing growth in China, the International Energy Agency said yesterday.

OPEC will need to supply an average 29.8 million barrels a day, the IEA said in its monthly report, reducing its previous assessment by 200,000 barrels. That would require the group to cut output by 1.1 million barrels from the 30.9 million it pumped in May, according to the report. The agency kept its global oil-demand estimates for this year unchanged.

U.S. Supplies

U.S. crude stockpiles gained by 2.5 million barrels in the week ended June 7, the Energy Information Administration, the Energy Department’s statistical arm, said yesterday. A median 1.5 million-barrel decrease was forecast by 11 analysts in a Bloomberg News survey.

Gasoline inventories rose by 2.7 million barrels, exceeding an estimated increase of 500,000 barrels, the data showed. Distillate-fuel supplies, including heating oil and diesel, dropped by 1.2 million barrels. They were projected to climb by 1.5 million.

Brent has technical support along its 50-day moving average, around $102.90 today, data compiled by Bloomberg show. Front-month futures yesterday reversed an intraday drop to settle above that indicator for the fourth time in five days. Buy orders tend to be clustered around chart-support levels.

Taksim Square

Six candidates are vying to succeed Mahmoud Ahmadinejad as president of Iran in the first round of elections to be held tomorrow. If no candidate gets a majority in the initial stage of the contest, the top two will compete in a June 21 runoff. The U.S. and its allies are restricting Iran’s oil exports, the country’s largest revenue source, to pressure the Islamic Republic to stop enriching uranium.

Several thousand protesters gathered at Taksim Square yesterday, chanting anti-government slogans as groups of police, deployed around the square, looked on. The unrest in Turkey, which spread nationwide after May 31, has marked one of the biggest challenges to Prime Minister Recep Tayyip Erdogan since he came to power more than 10 years ago.

The Turkish Mediterranean port of Ceyhan is the export terminal for crude transported via pipeline from northern Iraq, OPEC’s second-largest producer. It also receives Azeri Light blend via through the 1,100-mile (1,770-kilometer) Baku-Tbilisi-Ceyhan pipe.

Farther to the northwest, an estimated 2.9 million barrels a day of oil, most of it from Russia, flowed through the Turkish Straits in 2010, according to the EIA, which designates the waterway as “one of the busiest and most dangerous choke points in the world supplying Western and Southern Europe.”

The straits, including two narrow waterways of the Bosporus and the Dardanelles, connect the Sea of Marmara with the Black Sea on one side and the Aegean arm of the Mediterranean Sea on the other.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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

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