West Texas Intermediate crude was little changed after the biggest drop in seven months yesterday. Prices are headed for the first weekly decline since May.
Futures pared gains made earlier today, leaving the weekly loss at 3 percent. Oil fell yesterday after the U.S. Federal Reserve signaled it will scale back economic stimulus. China’s central bank injected funds to alleviate the worst cash crunch in at least a decade. WTI’s discount to Brent widened after closing yesterday at the smallest since 2011.
“The oil market, indeed most commodity markets, are trying to assess whether yesterday’s Fed-induced selloff was overdone,” Nic Brown, head of commodities research at Natixis in London, said in an e-mailed response to questions. “Some support is probably coming from the addition of liquidity in Chinese money markets overnight.”
WTI for August delivery was 5 cents lower at $95.09 a barrel in electronic trading on the New York Mercantile Exchange at 2:05 p.m. London time after earlier advancing as much as 70 cents, or 0.7 percent. The July contract expired yesterday after falling $2.84, or 2.9 percent, to $95.40, the biggest loss since Nov. 7.
Brent for August settlement was 5 cents higher at $102.20 a barrel on the London-based ICE Futures Europe exchange. It dropped $3.97, or 3.7 percent, to $102.15 yesterday. The volume of all futures traded was 21 percent below the 100-day average. The European benchmark grade ended the session yesterday at a premium of $7.01 to WTI, the narrowest since January 2011. The spread is at $7.11 today.
The Fed may begin tapering bond purchases this year and end them in 2014 should the economy continue to improve, Chairman Ben S. Bernanke said in Washington on June 19.
The People’s Bank of China added funds to the financial system via short-term liquidity operations yesterday, according to Hao Hong, chief China strategist at Bank of Communications Co. in Hong Kong. The central bank did not respond to faxed questions seeking comment.
China’s manufacturing is shrinking at a faster pace this month. The preliminary reading of 48.3 for a Purchasing Managers’ Index released yesterday by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.
Royal Dutch Shell Plc’s Nigerian unit shut its Trans Niger Pipeline on June 19 after an explosion, the company said yesterday in an e-mailed statement. The closure affects 150,000 barrels a day of crude, which goes to the Bonny export terminal.