West Texas Intermediate crude fell, trimming the biggest weekly increase since June, as the U.S. economy grew less than expected in the first quarter.
Futures dropped 0.7 percent after the Commerce Department said gross domestic product rose at a 2.5 percent annual rate. Economists surveyed by Bloomberg expected a gain of 3 percent. Oil jumped 5 percent in the past two days on lower-than-expected U.S. jobless claims and a decrease in gasoline stockpiles.
“The GDP number is quite a bit lower than expected,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “It’s pretty disappointing. Economic growth is just not very exciting and it’s not conducive to oil demand.”
WTI for June delivery retreated 64 cents to settle at $93 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 12 percent below the 100-day average for the time of day at 3:35 p.m.
Prices jumped 8 percent in the six days through yesterday, capping the longest rally since July. Crude’s gain of 5.7 percent this week is the biggest since June 29.
“We are a little short-term overbought,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “I am shocked that we got to these levels here so fast.”
Brent for June settlement slid 25 cents to end the session at $103.16 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.2 percent above the 100-day average.
The European benchmark grade’s premium to WTI widened for the first time in five days, strengthening 39 cents to $10.16 a barrel. Yesterday, it slipped below $10 for the first time in 15 months. The spread closed at a record $27.88 in October 2011.
The U.S. grew at a faster pace in the first quarter than the fourth, when it gained 0.4 percent. Consumer spending, the biggest part of the economy, climbed by the most since the three months ending in December 2010. Government outlays declined for the 10th time in the past 11 quarters, restraining expansion.
“GDP is weaker than expected and it takes wind out of the market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The number is weighing on market sentiment. It’s been an incredible week for oil.”
Today’s GDP estimate is the first of three for the quarter, with the other releases scheduled for May and June, when more information becomes available.
“The first-quarter GDP number is a bit disappointing, but traders often take the first estimate with a grain of salt,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago.
The U.S., the world’s biggest oil consuming country, accounted for 21 percent of global demand in 2011, according to BP Plc’s Statistical Review of World Energy.
U.S. usage increased 0.8 percent in the week ended April 19 to 18.6 million barrels a day, the Energy Information Administration reported on April 24. Consumption was 0.8 percent lower than a year ago and 5 percent less than during the same period in 2011.
Crude inventories rose to 388.6 million barrels in the week, the most since July 1990, the EIA, the Energy Department’s statistical arm, said. Domestic production climbed 1.6 percent to 7.33 million barrels a day, the most since April 1992.
“U.S. production is above 7.2 million barrels and there is no slowdown in sight,” Cooper said. “Demand is still lackluster. Supply is really outstripping overall demand growth.”
Gasoline stockpiles decreased 1.8 percent last week to 217.8 million barrels as demand for the fuel jumped 4.4 percent to 8.75 million barrels a day, the EIA said.
Crude prices may increase through May 3 on speculation that the European Central Bank will cut its key interest rate to a record low, a Bloomberg survey of economic analysts showed.
Implied volatility for at-the-money WTI options expiring in June was 20.5 percent, compared with yesterday’s 20.7 percent.
Electronic trading volume on the Nymex was 422,528 contracts as of 3:35 p.m. It totaled 560,626 contracts yesterday, 3.2 percent below the three-month average. Open interest was 1.74 million contracts.