West Texas Intermediate crude traded near the lowest level in a month amid speculation that the Federal Reserve will further curb stimulus measures after signs of improvement in the U.S. economy.
Futures were little changed after tumbling 3 percent yesterday, the biggest drop since Nov. 7, 2012, as the dollar gained. Investors are weighing how quickly the Fed will reduce bond purchases after data yesterday showed U.S. jobless claims fell and manufacturing expanded. Crude stockpiles declined for the fourth time in five weeks, according to a Bloomberg News survey before data from the Energy Information Administration.
“It’s a reaction by the market to the surge in the U.S. dollar due to the tapering expectation that really caused WTI to plunge” yesterday, said Victor Shum, a vice president at IHS Energy Insight in Singapore. “Weaker currencies for consuming countries make oil look expensive, that’s why there is an inverse relationship between the move in the U.S. dollar and moves in oil futures.”
WTI for February was at $95.41 a barrel, down 3 cents, in electronic trading on the New York Mercantile Exchange at 4:06 p.m. Singapore time. It slipped $2.98 to $95.44 a barrel yesterday, the lowest since Dec. 2. The volume of all contracts traded was about 10 percent below the 100-day average. Prices are down 4.9 percent this week, the most since September 2012.
Brent for February settlement rose 30 cents, or 0.3 percent, to $108.08 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $12.67 to WTI.
The Labor Department reported that jobless claims fell by 2,000 to 339,000 last week, less than the median forecast of 344,000 by 26 economists surveyed by Bloomberg. The Bloomberg Dollar Index, which tracks the currency against 10 major peers, was little changed after gaining 0.3 percent yesterday.
Manufacturing in the U.S. expanded in December at the second-fastest pace in more than two years. The Institute for Supply Management’s factory index eased to 57, from the prior month’s 57.3, which was the highest since April 2011, the Tempe, Arizona-based group’s report showed yesterday.
The Fed is scaling back bond purchases because of “cumulative progress and an improved outlook for the job market,” Chairman Ben S. Bernanke said on Dec. 18 in Washington. The Fed will trim monthly bond buying to $75 billion from $85 billion starting this month.
The Energy Information Administration is forecast to report that crude stockpiles decreased by 2.83 million barrels to 364.7 million last week, according to the median of eight analyst responses in a Bloomberg survey. The release is scheduled for 11 a.m. today in Washington.
WTI may decline again next week, a Bloomberg survey showed. Thirteen of 22 analysts, or 59 percent, forecast crude will fall through Jan. 10. Four respondents, or 18 percent, predicted a gain, and five said prices will be little changed. Last week, 73 percent of participants predicted a drop.