March 11 (Bloomberg) -- Brent crude fell for a second day as industrial production slowed in China, the world’s second-biggest oil consumer, and Saudi Arabia boosted output.
Futures slid as much as 0.9 percent after gaining 0.4 percent last week, snapping three weeks of declines. Saudi Arabia’s crude production rose in February from a 20-month low, according to an official with knowledge of the country’s oil policy. China started the year with the weakest industrial output since 2009, government data showed March 9. Iran, which is under Western sanctions because of its nuclear program, said the prospects for resolving the dispute have improved.
“We have no reason to rally,” amid rising Saudi output and reduced demand from refiners during seasonal maintenance, Andrey Kryuchenkov, an analyst at VTB Capital in London, said today in an e-mailed response to questions. Brent probably won’t drop below support at $109 a barrel, he said.
Brent for April settlement on the London-based ICE Futures Europe exchange declined as much as 95 cents to $109.90 a barrel and was at $110.15 a barrel as of 11:41 a.m. London time. The volume of all futures traded today was 34 percent above the 100-day average for Brent, and 32 percent lower for West Texas Intermediate. The European benchmark was at a premium of $18.52 to WTI. The gap was at $18.90 on March 8, the narrowest close since Jan. 31.
WTI for April delivery fell as much as 43 cents to $91.52 a barrel in electronic trading on the New York Mercantile Exchange. The contract advanced 39 cents to $91.95 on March 8, the highest close since Feb. 28. Prices have lost 0.4 percent this month.
U.S. crude could be supported in the second and third quarters by pipeline “de-bottlenecking” in North America from April to June, according to Goldman Sachs Group Inc.
The balance at Cushing, Oklahoma, the largest oil storage hub in the U.S., could “shift into a large deficit” in the second quarter as refineries end maintenance and new pipeline capacity from the Permian basin diverts crude to the Gulf Coast, Jeffrey Currie, Goldman’s head of commodities research in New York, said in an e-mailed report today.
Saudi Arabia raised crude production in February to 9.15 million barrels a day, an increase of 100,000 barrels from the previous month, the Persian Gulf official said, asking not to be identified because the information is confidential. The kingdom reduced exports to 9.16 million barrels last month from 9.26 million, according to the official.
“The higher Saudi production serves as a cap on oil prices and could drive down WTI,” said Gordon Kwan, the head of energy research at Mirae Asset Securities Ltd. in Hong Kong.
China’s industrial output expanded 9.9 percent in January and February, according to the government figures. That’s lower than a 10.6 percent median estimate in a Bloomberg survey. Retail sales also slowed in the period and new local-currency loans were down in February, separate data showed.
“Weaker-than-expected Chinese economic data damped investors sentiment,” Myrto Sokou, an analyst at Sucden Financial Ltd. in London said in an e-mailed response to questions. The figures set a “bearish tone” which may depress Brent to as low as $109.14 a barrel, she said.
Iran saw signals that “the other side is acting in good faith” in talks about its uranium enrichment program, Foreign Minister Ali Akbar Salehi said yesterday in Tehran.
The Islamic republic met on Feb. 26 and Feb. 27 in Almaty, Kazakhstan, with China, Germany, France, Russia, the U.K. and the U.S. No deal was announced and the details of a proposal to Iran weren’t released. The two sides are scheduled to meet March 18 in Istanbul and from April 5 to April 6 in Almaty.
Iran’s crude output in January was the lowest in three decades at 2.65 million barrels a day, the International Energy Agency said in its monthly oil market report Feb. 13.
“The mood music coming after the talks is a bit better than expected,” Robin Mills, the head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said in a telephone interview yesterday. “That helped to improve expectations for the next round and that probably helped in taking some of the edge off of oil prices.”
Hedge funds reduced bullish oil bets to a two-month low in the week ended March 5 as surging U.S. supplies pushed prices below $90 for the first time this year. Stockpiles have climbed in eight of the past nine weeks as output from shale formations sent domestic production to the highest levels since 1992.
Money managers cut net-long positions, or wagers on rising prices, by 4.4 percent to the lowest since Jan. 1, the Commodity Futures Trading Commission’s March 8 Commitments of Traders report showed. It was the third weekly drop, the longest series of declines since November. Bullish bets have fallen 24 percent from an 11-month high in mid-February.
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