WTI Crude Nears Five-Week Low on China Economy Concern

West Texas Intermediate crude rebounded from a one-month low, narrowing its discount to Brent, as better-than-expected U.S. economic reports raised expectations that fuel demand will be stronger. Brent dropped.

Prices climbed for the first time in four days, paring the weekly loss to 4.3 percent. U.S. jobless claims fell last week to the lowest level since the end of November and retail sales rose in February for the first time in three months.

“The jobless claims and retail sales are good and crude has a chance to come back above $100,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Markets don’t trade in a straight line. It’s time for some correction.”

WTI for April delivery rose 21 cents, or 0.2 percent, to settle at $98.20 a barrel on the New York Mercantile Exchange. The contract decreased 2 percent yesterday to $97.99, the lowest close since Feb. 6. The volume of all futures traded was 34 percent above the 100-day average.

Brent for April settlement slipped 63 cents, or 0.6 percent, to $107.39 a barrel on the London-based ICE Futures Europe exchange. Volume was 12 percent above the 100-day average. The European crude’s premium to WTI narrowed to $9.19 from $10.03 yesterday, the widest close in six weeks.

Jobless Claims

Jobless claims dropped by 9,000 to 315,000 in the week ended March 8, a Labor Department report showed today. The median forecast of 53 economists surveyed by Bloomberg was 330,000. Continuing claims decreased for a third straight week.

Retail sales advanced 0.3 percent last month, the Commerce Department said. The median forecast of 84 economists surveyed by Bloomberg was a 0.2 percent advance. Nine of 13 major categories showed increases.

“The economic data is good and it helps to raise demand outlooks,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.

U.S. petroleum consumption jumped 4 percent to 19 million barrels a day last week, the Energy Information Administration said yesterday. Gasoline demand rose 6.4 percent to 8.95 million.

The Energy Department announced yesterday it would sell 5 million barrels of crude from the Strategic Petroleum Reserve in a test of the distribution system.

Rebound Expected

“I fully expect crude prices to rebound from the SPR release-induced faux decline,” said Paul Crovo, a Philadelphia-based oil analyst at PNC Capital Advisors.

The sale of less than 1 percent of the stockpile was scheduled and isn’t tied to geopolitical events, the department said. Potential buyers have until tomorrow to submit bids. Delivery will take place in April.

Brent fell as China refined the least crude in four months. Processing in the January-February period fell 1 percent from a year earlier to 78.78 million metric tons, the National Bureau of Statistics said in a statement on its website today. That’s equivalent to 9.79 million barrels a day.

“If China consumes less crude, obviously it’s going to hit the oil market,” Finlon said.

U.S. crude stockpiles rose 6.18 million barrels last week to 370 million, the highest level since December, according to the EIA. Domestic production climbed 1.3 percent to 8.18 million barrels a day, the most since July 1988. The refinery utilization rate slipped 1.4 percentage points to 86 percent of capacity, the least since October.

OPEC Cuts

The Organization of Petroleum Exporting Countries will cut crude exports this month to the lowest level since November as refinery demand slows in Europe and North America, according to tanker-tracker Oil Movements.

OPEC, responsible for 40 percent of global oil supplies, will decrease shipments by 1.1 million barrels a day, or 4.6 percent, to 23.6 million a day in the four weeks to March 29,

Investors pulled a net $41.9 million yesterday from U.S.- listed exchange-traded funds that invest in energy, equivalent to 1.1 percent of total assets, data compiled by Bloomberg show. They withdrew $21.1 million from the United States Oil Fund, the biggest oil ETF.

Implied volatility for at-the-money WTI options expiring in May was 19.4 percent, up from 18.7 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 603,923 contracts at 3:01 p.m. It totaled 1.08 million yesterday, the most since July 10. Open interest was 1.68 million contracts.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Richard Stubbe

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