West Texas Intermediate crude fell the most since March 12 on speculation that U.S. inventories gained for an 11th week and as a gauge of manufacturing rose less than expected. Brent slipped.
WTI dropped for a second day. Stockpiles probably climbed 2.5 million barrels last week, according to a Bloomberg survey before a government report tomorrow. The Institute for Supply Management’s U.S. manufacturing index was 53.7 in March, lower than the 54 forecast in a Bloomberg survey. A separate report showed Chinese manufacturing weakened.
“All the news is bearish today,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The manufacturing data is not supportive and we are expecting another build in inventories.”
WTI for May delivery declined $1.84, or 1.8 percent, to settle at $99.74 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 4.4 percent below the 100-day average at 4:45 p.m. Prices decreased 1 percent in March.
Prices were little changed from the settlement after the American Petroleum Institute reported U.S. crude inventories dropped 5.8 million barrels last week. WTI futures fell $1.99, or 2 percent, to $99.59 at 4:45 p.m. in electronic trading. Prices were $99.37 before the report was released at 4:30 p.m.
Brent crude for May settlement slid $2.14, or 2 percent, to end the session at $105.62 a barrel on the London-based ICE Futures Europe exchange. Volume was 8.6 percent above the 100-day average. The European benchmark was at a $5.88 premium to WTI after closing at $6.18 yesterday.
WTI’s losses accelerated after prices moved below the front-month contract’s 200-day moving average, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
“We broke the 200-day average and that’s definitely weighing on things,” he said. “Inventories are going to have another build tomorrow. The weak data from China set the tone for the day.”
U.S. crude inventories rose 0.7 percent to 385 million barrels in the week ended March 28, according to the median of nine analyst estimates in a Bloomberg survey before the Energy Information Administration report.
Stockpiles climbed 6.62 million barrels to 382.5 million in the week ended March 21, the highest level since November, the EIA, the Energy Department’s statistical arm, said last week. Inventories along the Gulf of Mexico, known as PADD 3, rose to 200.3 million, the most in EIA data going back to 1990.
“We have a well-supplied market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Refineries operated at 86 percent of their capacity in the week ended March 21, staying below 90 percent for a 10th week. They probably rose to 86.4 percent last week, the survey showed.
“I do think that when runs increase, we should start to see crude inventories drop,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “I have every reason to believe that runs are going to be much closer to 90 in a few weeks.”
The ISM manufacturing index rose from February’s 53.2, the Tempe, Arizona-based group reported. China’s Purchasing Managers’ Index decreased to 48 in March, the lowest reading since July, HSBC Holdings Plc and Markit Economics said today. Readings below 50 signal contraction.
WTI gained last week on speculation that the Ukraine crisis would disrupt global oil supplies. Futures settled at $101.67 on March 28, the highest level since March 7. Prices have closed above $100 since March 26.
The $100 level “is a little too high given the inventories and the factor that the global economy doesn’t look very strong,” Lynch said.
Implied volatility for at-the-money WTI options expiring in May was 18.5 percent, up from 17.8 percent yesterday, data compiled by Bloomberg showed.