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Oil Caps Fifth Weekly Drop Since February

Crude capped its fifth weekly decline since February as China’s economic growth slowed to the least in almost three years and Saudi Arabia’s oil minister said the kingdom is determined to see lower prices.

Futures dropped 0.8 percent after the National Bureau of Statistics said gross domestic product in the world’s second-biggest oil-consuming country expanded 8.1 percent in the first quarter from a year earlier. There’s no shortage of oil supply, and Saudi Arabia is working toward damping prices, Oil Minister Ali al-Naimi said today.

“The Chinese economy is by no means falling off a cliff but it’s hard to dispute that it’s slowing down,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion. “This is going to have a definite impact on demand.”

Crude for May delivery fell 81 cents to settle at $102.83 a barrel on the New York Mercantile Exchange. Prices were down 0.5 percent this week and have fallen 6.3 percent since settling at $109.77 on Feb. 24, the highest level since May 3.

Brent oil for May settlement climbed 12 cents to expire at $121.83 a barrel on the London-based ICE Futures Europe exchange. The more actively traded June contract dropped 31 cents, or 0.3 percent, to $121.21.

Growth in China, which ranks behind only the U.S. in terms of oil consumption, trailed forecasts by the most since the third quarter of 2008, based on Bloomberg calculations. The median estimate in a Bloomberg survey of 41 economists was for an 8.4 percent first-quarter expansion. The economy grew 8.9 percent in the fourth quarter.

Chinese Consumption

China cut daily crude processing by 3 percent in March from a month earlier as refineries started maintenance, according to data released by the National Bureau of Statistics today.

“The China GDP number had a thawing effect in the market,” said Kyle Cooper, director of IAF Advisors, a Houston-based consulting firm. “The Saudis want to see overall economic growth, and $100 oil has a lot of incentives for alternative energy. The Saudis don’t want to see alternatives.”

Saudi Arabia is working toward a price drop by highlighting that there’s no shortage of supply, al-Naimi said in a statement in Seoul today. New York futures topped $110 a barrel in intraday trading March 1. Crude stockpiles held by consuming nations are rising, and the kingdom is producing 10 million barrels a day, he said.

“We are seeing a prolonged period of high oil prices,” al-Naimi said. “We are not happy about it.”

Saudi Output

Saudi Arabia produced 9.71 million barrels a day of oil in March, according to Bloomberg estimates.

“The Saudi comment is a definitely negative sign,” said Phil Flynn, an analyst at PFGBest in Chicago. “The oil market is higher than it should be based on global supply.”

Oil prices also declined as U.S. stocks moved lower and the euro fell against the dollar for the first time in three days. A weaker euro and stronger dollar reduces oil’s appeal as an investment alternative.

The Standard & Poor’s 500 Index retreated as much as 1 percent and the euro dropped as much as 0.9 percent.

Oil may fall next week on speculation that negotiations between Iran and world powers over the Persian Gulf nation’s nuclear program will reduce tension that has bolstered prices, a Bloomberg News survey showed.

Sixteen of 33 analysts, or 49 percent, forecast oil will decline through April 20. Twelve respondents, or 36 percent, predicted prices will rise and five estimated there will be little change.

Iran Talks

The five permanent members of the United Nations Security Council -- Britain, China, France, Russia and the U.S. -- plus Germany, the so-called P5+1, will hold talks with Iran for the first time in 15 months tomorrow in Turkey. The previous round of negotiations ended without agreement in January 2011.

“If there’s an agreement this weekend there will be a huge impact on prices,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Electronic trading volume on the Nymex was 416,915 contracts as of 3:06 p.m. in New York. Volume totaled 741,063 contracts yesterday, 14 percent above the three-month average. Open interest was 1.58 million, a one-month high.

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