Oil fell the most in more than five weeks as U.S. orders for durable goods dropped in January by the most in three years, signaling slower economic growth and lower fuel demand.
Futures declined 1.9 percent in New York as data from the Commerce Department showed bookings for goods meant to last at least three years slumped 4 percent. An Energy Department report tomorrow will show U.S. crude supplies rose to the highest level in five months last week, according to the median of analyst responses in a Bloomberg News survey.
“The durable goods numbers do not paint a picture of robust demand going forward,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “We’re going to see builds in this week’s report, which is also putting downward pressure on prices.”
Crude oil for April delivery fell $2.01 to settle at $106.55 a barrel on the New York Mercantile Exchange. It was the biggest decline since Jan. 20. Prices are up 9.9 percent in the past year.
Prices were little changed from the close after the American Petroleum Institute said oil inventories rose 521,000 barrels to 341.9 million last week. The April contract slid to $106.48 a barrel at 4:33 p.m. in electronic trading.
Brent oil for April settlement dropped $2.62, or 2.1 percent, to end the session at $121.55 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate crude narrowed for a fourth day, dropping 61 cents to $15 a barrel. It reached a record of $27.88 on Oct. 14.
Durable goods orders were projected to decline 1 percent, according to the median forecast of 80 economists surveyed by Bloomberg News.
Oil also slipped in New York as home prices in 20 U.S. cities dropped to the lowest level since the housing crisis began in mid-2006. The S&P/Case-Shiller index fell 4 percent from a year earlier, a report from the group showed.
U.S. crude oil inventories probably rose 1.1 million barrels last week, according to the median of 12 analyst estimates in the Bloomberg News survey. Supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, probably declined, the survey showed.
The API collects supply information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Crude climbed to $109.77 a barrel in New York on Feb. 24, the highest settlement since May 3, as escalating tension over Iran’s nuclear program threatened supplies. The Persian Gulf nation missed an opportunity last week to begin clearing up what can “only plausibly” be called an atomic-bomb program, Laura Kennedy, the U.S. ambassador to the United Nations Conference on Disarmament, said today in Geneva.
At $110 “crude oil was pretty rich, especially for the month of February, this is not a big demand period,” said James Cordier, the founder of Optionsellers.com in Tampa, Florida. “A lot of investors were buying crude oil on the idea that conflict between Israel and Iran was about to take place and I think that has come down a little bit.”
Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, pumped 3.55 million barrels of crude a day last month, according to data compiled by Bloomberg News. The Islamic republic has threatened to block shipments through the Strait of Hormuz, a transit route for about 20 percent of globally traded oil, if its exports are blocked.
“Prices have risen for a long time on the same mantra about Iran,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “There’s a limit to how high they can go while the oil is still flowing.”
Oil gained early in the session after confidence among U.S. consumers rose in February to the highest level in a year. The Conference Board’s index increased to 70.8 from a revised 61.5 in January, the New York-based private research group said. Economists predicted a climb to 63, according to a Bloomberg News survey.
“Prices are still at rarefied heights,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The increasing optimism about the economy is still giving us support.”
New York oil’s 14-day relative strength index, a technical indicator, climbed to 76.9 on Feb. 24 after seven straight advances. A reading above 70 indicates futures have risen too quickly and further gains probably aren’t sustainable. The RSI was 62.4 at 4:47 p.m.
“There’s no specific headline that explains this move,” Bentz said. “It’s time for us to take a breather and for some of the froth to come out of the market.”
Electronic trading volume on the Nymex was 543,868 contracts as of 4:34 p.m. in New York. Volume totaled 687,880 contracts yesterday. Open interest was 1.5 million contracts.