WTI Fluctuates After Third Weekly Advance as China Grows

West Texas Intermediate crude declined after a thirdly weekly increase amid evidence that economic expansion in China, the world’s second-largest oil consumer, is slowing.

Futures retreated as much as 1.1 percent in New York. China’s growth dropped to 7.5 percent in the second quarter from 7.7 percent in the first, as factory output and investment in fixed assets decelerated, data from the National Bureau of Statistics in Beijing showed. Crude slipped even as Islamists in Egypt, home to the Suez Canal, called for mass protests today to demand the reinstatement of ousted President Mohamed Mursi.

“China’s growth is well below the Formula-One speed seen in the pre-financial-crisis times,” said Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark, who predicts Brent crude may rebound to $112 a barrel this month. “The data does indeed weigh on prices, but I would estimate it would not be enough to counter the current geopolitical jitters.”

WTI for August delivery fell as much as $1.19 to $104.76 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.92 at 1:34 p.m. London time. The volume of all futures traded was 7.9 percent below the 100-day average. The contract climbed $1.04 to $105.95 on July 12, capping a 13 percent rally over the past three weeks.

Brent for August settlement was at $108.24 a barrel, down 57 cents, on the London-based ICE Futures Europe exchange. The more active September future was 54 cents lower at $107.39. The European benchmark grade was at a premium of $3.33 to WTI. The spread was $1.99 on July 10, the narrowest based on closing prices since November 2010.

Chinese Economy

China’s industrial production increased 8.9 percent in June from a year earlier, according to the statistics bureau. That’s below a median 9.1 percent advance forecast by 44 economists in a Bloomberg survey and also lags a 9.2 percent gain in May.

“The China data is very mixed, and that’s probably why the response is so muted,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney. “There is underlying fundamental strength in the energy complex. We’re still looking for a test of that $106-to-$108 zone for West Texas.”

Oil consumption in Asia’s most populous nation surged 11 percent from a year ago to about 10 million barrels a day last month, the data showed. China will account for 11 percent of world oil demand this year, with the U.S. taking a 20 percent share, the International Energy Agency forecast in its monthly oil-market report July 11.

Demand Outlook

Demonstrations in Egypt, which may target military sites, are building on efforts by the Muslim Brotherhood to squeeze the army after it pushed Mursi from power on July 3 following a wave of protests against his rule. A combined 2.24 million barrels a day of oil were shipped from the Red Sea to Europe and North America in 2011 via the Suez Canal and the Suez-Mediterranean pipeline, Energy Department data show.

Hedge funds increased bullish bets on WTI to the highest level since May 2011, the U.S. Commodity Futures Trading Commission said July 12. Money managers boosted their net-long positions on WTI, or wagers that prices will rise, by 6.9 percent to 281,918 futures and options combined in the week to July 9, the CFTC said in its Commitments of Traders report.

Funds and other money managers raised bullish bets on Brent crude to the highest level in almost five months in the week to July 9, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 176,988 lots, the London-based exchange said today in its weekly Commitments of Traders report. The increase of 28,458 lots, or 19 percent, is the biggest in percentage terms since November, 2012, and brings net-long positions to their highest since June 18.

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 at sev@bloomberg.net

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