West Texas Intermediate crude slid from a two-week high after industrial production slowed in China, the world’s second-biggest oil-consuming country.
Prices fell 0.3 percent as Chinese output grew 9.2 percent in May, compared with 9.3 percent in April, the National Bureau of Statistics said yesterday. Futures, which gained 2.9 percent in the previous three sessions, also decreased as production resumed at the North Sea’s Buzzard oilfield. Gasoline demand was at a 12-year seasonal low, according to a U.S. report.
“The Chinese economic news is bearish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “With the run-up we had, people are just feeling that maybe it’s a little too much given the economic situation especially in China.”
WTI for July delivery slipped 26 cents to settle at $95.77 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 6.5 percent below the 100-day average for the time of day at 3:44 p.m. Prices advanced $1.27 to $96.03 a barrel on June 7, the highest close since May 21.
Brent for July settlement dropped 61 cents, or 0.6 percent, to $103.95 a barrel on the London-based ICE Futures Europe exchange. Volume was 9 percent below the 100-day average for the time of day. Brent’s premium to WTI shrank 35 cents to $8.18, the narrowest level since May 21.
Chinese industrial output grew at a slower pace than the 9.4 percent median estimate in a Bloomberg survey of 39 economists.
China’s commercial crude inventories climbed to a three-month high of 28.68 million metric tons (210.2 million barrels) in April, according to Bloomberg calculations based on data released by the China Oil, Gas & Petrochemicals newsletter, published by the official Xinhua News Agency.
The country used 9.76 million barrels a day, or 11 percent, of the world’s oil in 2011, according to BP Plc’s Statistical Review of World Energy. That made China the second-biggest user of oil after the U.S.
The Buzzard field in the North Sea returned to approximately full pumping rates of about 208,000 barrels a day during the past two days after a halt June 6 because of an equipment failure, according to two people with knowledge of the matter who asked not to be identified.
Buzzard is the largest contributor to the Forties crude grade, which sets the value of Dated Brent, the benchmark used to price more than half of the world’s crude.
“There are a lot of supplies out there, and demand is relatively subdued,” said Rich Ilczyszyn, chief market strategist and founder of commodities trading firm Iitrader.com in Chicago.
U.S. crude stockpiles reached an 82-year high of 397.6 million barrels in the week ended May 24 before dropping 1.6 percent the following week, according to the Energy Information Administration, the statistical arm of the Energy Department. Production climbed to 7.3 million, the highest level since April 1992. Output jumped 19 percent in 2012.
A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Oklahoma and Texas. The surge in output of oil and gas helped the U.S. meet 88 percent of its energy needs in February, the highest monthly level since April 1986, EIA data show.
Global resources of oil and gas from shale formations are greater than previously estimated as more nations join efforts to explore for deposits following a burst of production in the U.S., the EIA said in an assessment of worldwide shale resources, released today.
“This is not a bull market,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We need to see demand growth.”
Gasoline demand averaged 8.73 million a day in the four weeks ended May 31, the lowest level for this time of the year since 2001, EIA data showed.
Gasoline futures for July delivery declined 0.8 percent to settle at $2.8481 a gallon. Futures dropped amid speculation that Midwest supplies will increase as refineries return from maintenance and as BP Plc completes work on the largest crude unit at its Indiana refinery this month.
Oil also followed broad declines in commodities. The Standard & Poor’s GSCI Index of 24 commodities dropped 0.7 percent, down for the first time in six days.
Money managers, including hedge funds, commodity pools and commodity-trading advisers, cut bets on rising WTI prices in the seven days ended June 4, according to the U.S. Commodity Futures Trading Commission. Net-long positions dropped by 5,404 futures and options combined, or 2.5 percent, to 212,127, the CFTC said in its June 7 Commitments of Traders report.
Implied volatility for at-the-money WTI options expiring in August was 20.1 percent, compared with 20.9 percent on June 7, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 490,101 contracts as of 3:44 p.m. It totaled 871,598 contracts June 7, 45 percent higher than three-month average. Open interest was a record 1.8 million contracts.