Oil Falls to Three-Month Low as Earnings Bolster Concern

Brent crude rose on evidence of a stronger economy in China, the world’s second-largest oil consumer, and signs that previous price declines were overdone.

Oil in London gained as much as 1 percent today after China’s preliminary manufacturing index, released by HSBC Holdings Plc and Markit Economics, registered 49.1 in October compared with 47.9 for September. A reading above 50 indicates expansion. Futures were little changed in New York.

“We have seen a massive price slump in the past few days, so it’s not surprising to see prices rebound,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by telephone. “The sharp decrease before was exaggerated. There are still supply-side risks. China helped to improve market sentiment.”

Brent for December delivery advanced as much as $1.09 to $109.34 a barrel on the ICE Futures Europe exchange and was at $108.72 at 1:30 p.m. London time. The contract closed 1.1 percent lower at $108.25 yesterday, its sixth consecutive decline. The European benchmark’s premium to the New York-traded WTI grade widened to $21.89 from $21.58 yesterday.

West Texas Intermediate crude was little changed at $86.79 a barrel after falling as much as 0.5 percent. Futures rose as much as 0.9 percent earlier in the day in electronic trading on the New York Mercantile Exchange.

Nigeria Floods

Nigeria, Africa’s top crude producer, lost as much as 500,000 barrels a day of output during two months of flooding that deluged oil fields in the Niger River delta and is now restarting some platforms.

Production dropped to 2.1 million barrels a day at the height of the floods “in the last couple of weeks,” Osten Olorunsola, head of the Department for Petroleum Resources, the oil industry’s regulator, said in Lagos, the commercial capital. Output is gradually being restored to 2.3 million barrels as the water recedes and producers reopen wells and other facilities, he said.

Syria’s President Bashar al-Assad and some rebel groups agreed to a cease-fire in that nation’s conflict during the Eid al-Adha, a Muslim festival, this week, according to United Nations Special Envoy Lakhdar Brahimi.

WTI erased gains earlier today following a report from Markit Economics that the German purchasing managers’ index for manufacturing showed 45.7 for October, down from 47.4 in September. Business confidence in the country, Europe’s largest economy, slumped to a 32-month low.

German Confidence

“The weak PMI from Germany is a clear sign that the euro zone is struggling to reignite growth,” Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, said by phone. “The figure was much weaker than expected and weighs on the risk sentiment and oil prices.”

The Ifo institute in Munich said separately that its business climate index, based on a survey of 7,000 executives, dropped to 100.0 in October from 101.4 in September. That’s the sixth straight decline and the lowest reading since February 2010.

Crude rose earlier in the day before data released this week that may show an improving economy in the U.S., the world’s biggest crude user.

Purchases of new homes in the U.S. probably rose in September to their highest level since April 2010, according to the median estimate in a Bloomberg survey of 75 economists and analysts. Sales, tabulated when contracts are signed, climbed 3.2 percent from August to a 385,000 annual pace in September, according to the survey. The Commerce Department report is scheduled to be released today in Washington.

Durable Goods

Orders for durable goods in the U.S. rose 7.5 percent last month, according to a separate Bloomberg survey of economists conducted before tomorrow’s report from the Commerce Department.

The department may say on Oct. 26 that U.S. gross domestic product grew at a 1.9 percent annual pace in the three months ended Sept. 30, up from 1.3 percent the previous quarter, economists forecast.

Gasoline futures climbed as much as 0.9 percent after a ninth consecutive day of losses, the longest losing streak since August 1987. The contract for November delivery advanced 2.04 cents to $2.6254 a gallon on the New York Mercantile Exchange, after settling yesterday at $2.605, the lowest settlement since June 22.

The motor fuel has dropped about 29 percent this month after Exxon Mobil Corp., Valero Energy Corp. and Citgo Petroleum Corp. started refinery units following outages.

U.S. Gasoline

Gasoline inventories rose in the week ended Oct. 19 while demand fell 5 percent, the industry-funded American Petroleum Institute said yesterday.

An Energy Department report today will probably show that U.S. crude supplies climbed for a third week after output rose to the highest level in more than 17 years, according to the median of 11 analyst estimates in a Bloomberg survey.

Crude inventories grew by 1.8 million barrels in the seven days ended Oct. 19, the survey showed. A gain of that size would leave stockpiles at the highest level since July. Gasoline supplies climbed 500,000 barrels. Oil inventories increased by 313,000 barrels last week to 369.6 million, according to the API report.

The API collects stockpile 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.

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