West Texas Intermediate dropped to the lowest price this year and headed for a second weekly decline as Chinese manufacturing expanded less than forecast and OPEC crude production rose for the first time in six months.
WTI fell below $91 a barrel in New York for the first time since Dec. 31. The Organization of Petroleum Exporting Countries raised output by 97,000 barrels to 30.7 million a day in February, a Bloomberg survey showed. China’s manufacturing purchasing managers index fell to 50.1 last month, compared with a median forecast of 50.5. Oil also fell as $85 billion of spending cuts were about to be triggered in the U.S.
“There are worries about slower growth in China,” said Robert Montefusco, a senior broker at Sucden Financial Ltd. in London, who predicts that the European benchmark, Brent crude, may slide to $110 a barrel this month.
WTI for April delivery declined as much as $1.61, or 1.8 percent, to $90.44 in electronic trading on the New York Mercantile Exchange and was at $90.70 as of 1:19 p.m. London time. The volume of all futures traded was 57 percent above the 100-day average. Prices are down 2.6 percent this week and have lost 6.9 percent this month, the first time since 2006 that WTI has fallen in February.
Brent for April settlement dropped $1.07 to $110.31 a barrel on the London-based ICE Futures Europe exchange. Volume was more than double the 100-day average. The European benchmark grade was at a premium of $19.60 to WTI, compared with $19.33 yesterday.
OPEC crude output climbed as a gain by Libya outweighed a cut by Saudi Arabia, the Bloomberg survey showed. Libyan daily production increased by 130,000 barrels to 1.24 million last month, the biggest gain of any member, after the reopening of the country’s Zueitina export terminal early in February.
Saudi Arabia, OPEC’s biggest producer, pumped 9 million barrels a day, the lowest level since May 2011, according to the survey. Output was down 100,000 barrels from January and 900,000 barrels from May, when production reached the highest since at least January 1989.
In China, the world’s second-biggest oil consumer, manufacturing slowed last month, the PMI report from the Federation of Logistics and Purchasing in Beijing showed. The reading fell from 50.4 in January. A separate gauge from HSBC Holdings Plc and Markit Economics dropped to a four-month low of 50.4 from 52.3. A level above 50 indicates expansion.
Automatic cuts set to take effect today will pinch U.S. government functions as the country enters a more austere era that could push discretionary spending as a share of the economy to its lowest level in at least 50 years.
U.S. lawmakers locked in partisan feuds are turning to across-the-board cuts in national security, education and anti-poverty programs rather than structural changes to retirees’ benefits and the tax code.
Refinery seasonal maintenance will continue to pressure gasoline prices, AAA, the biggest U.S. motoring organization, said yesterday. The national average for regular gasoline at the pump yesterday was $3.782 a gallon, the highest-ever level for this time of year. February’s average of $3.65 was a record.
WTI may decline next week amid U.S. government spending cuts and crude inventories at a seven-month high, a Bloomberg survey showed. Twenty-one of 37 analysts and traders, or 57 percent, forecast crude will decline through March 8. Twelve respondents, or 32 percent, predicted an increase, and four forecast little change.
The decline may stall as futures approach technical support along the 100-day moving average, a level where buy orders tend to be clustered. This indicator is around $90.86 a barrel today, according to data compiled by Bloomberg. Crude’s 14-day relative strength index has also dropped to about 34, the lowest in four months. A reading below 30 signals prices have fallen too quickly for further losses to be sustainable.