Crude tumbled almost $4 in two days as more Americans than projected filed applications for unemployment benefits, raising concern that slower U.S. growth may weaken fuel demand and boost supplies.
Prices fell to a two-week low as jobless claims rose to the most since Nov. 24, according to the Labor Department. U.S. inventories increased to a 22-year high in an Energy Information Administration report yesterday. Futures extended their decline after the May West Texas Intermediate contract broke technical support at a key Fibonacci retracement level.
“The jobless claims report is not good and it raises concern about where the economy is actually going,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “People that are excited about this economy are those who accept mediocrity. Crude inventories are heading to an all-time high.”
WTI oil for May delivery dropped $1.19, or 1.3 percent, to $93.26 a barrel on the New York Mercantile Exchange, the lowest settlement since March 21. Prices are down $3.97 in the past two sessions. The consecutive two-day decline was the steepest since October. Trading was 58 percent above the 100-day average for the time of day at 4:17 p.m.
Brent crude for May settlement declined 77 cents, or 0.7 percent, to end the session at $106.34 a barrel on the London-based ICE Futures Europe exchange, the lowest settlement since Nov. 2. Trading was 69 percent above the 100-day average.
The European benchmark grade’s premium to WTI widened to $13.08 from $12.66 yesterday, the narrowest since June.
U.S. jobless claims rose by 28,000 in the week ended March 30 to 385,000, the Labor Department said today in Washington. The median forecast was 353,000 in a Bloomberg survey.
“The economic numbers are not good, especially on the jobs front, and people are very skittish,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We are going to see continued weakness in oil as inventories keep hitting record highs.”
U.S. crude stockpiles rose 2.71 million barrels last week to 388.6 million, the most since 1990, the EIA, the Energy Department’s statistical arm, said yesterday.
Oil demand will be “less than it was before” in the next few months, Maria van der Hoeven, executive director of the International Energy Agency, said today in a Bloomberg Television interview. “That will help, we hope, to loosen the tightness of the market.”
The IEA, the Paris-based adviser to 28 oil-consuming nations, cut its 2013 growth forecast for global oil consumption by 60,000 barrels in March to 90.6 million barrels a day. It was the second month the agency trimmed the outlook.
WTI jumped 3.8 percent last week, the most since the five days ended July 20, after the Commerce Department said March 28 that U.S. gross domestic product rose at a 0.4 percent annual rate in the fourth quarter, up from prior estimate of 0.1 percent. Growth slowed from 3.1 percent in the third quarter.
“The economy is expanding, but at a very, very slow pace,” Cooper said.
The May WTI contract breached $93.34 today, the 38.2 percent retracement level on a three-month Fibonacci study, indicating prices may fall further, said Bill Baruch, a senior market strategist at commodities trading firm Iitrader.com in Chicago.
“The momentum is on the downside now,” Baruch said. “One of the reasons why crude popped last week was that we had good data. But now we are having bad data and you are seeing everyone jumping ship.”
Implied volatility for at-the-money WTI crude options expiring in May was 20 percent at 4:15 p.m. little changed from yesterday.
Oil also dropped today after European Central Bank President Mario Draghi said risks remain to the region’s economy. Weak activity has been evident in the early part of this year, Draghi said at a press conference in Frankfurt after the ECB kept its benchmark interest rate at a record low of 0.75 percent.
“This economic outlook for the euro area remains subject to downside risks,” Draghi said. “Our monetary-policy stance will remain accommodative for as long as needed.”
The U.S. and the European Union accounted for 36 percent of world oil demand in 2011, according to BP Plc’s Statistical Review of World Energy.
Prices trimmed losses in the last hour of trading as the euro rebounded from the lowest level in four months against the dollar. The single currency climbed 0.8 percent to $1.2949 after falling to $1.2746. A stronger euro and weaker dollar increase dollar-denominated oil’s appeal as an investment alternative.
Electronic trading volume on the Nymex was 728,935 contracts as of 4:17 p.m. It totaled 675,832 contracts yesterday, 19 percent above the three-month average. Open interest was 1.726 million contracts, near the April 2 record of 1.732 million.