West Texas Intermediate crude capped the first weekly loss since May 2 as U.S. consumer spending fell in April and rising inventories signaled ample supply.
WTI declined for the third time in four days. Household purchases, which account for about 70 percent of the economy, dropped 0.1 percent, the first decrease in a year, the Commerce Department said today. Crude stockpiles climbed 1.66 million barrels to 393 million last week, the Energy Information Administration reported yesterday. Brent slipped as Russia pulled back most of its troops from the border with Ukraine.
“The economic data was not really giving us expectations that demand will be strong,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Supply is pretty ample here. Russia pulled back its troops and that reduced risk premium a little bit.”
WTI for July delivery slid 87 cents, or 0.8 percent, to end at $102.71 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 38 percent below the 100-day average. Prices are down 1.6 percent this week and up 3 percent this month.
Brent for July settlement dropped 56 cents, or 0.5 percent, to $109.41 a barrel on the London-based ICE Futures Europe exchange. Volume was 18 percent below the 100-day average. The European benchmark crude traded at a premium of $6.70 to WTI, compared with $6.39 yesterday.
The median forecast of 77 economists in a Bloomberg survey called for a 0.2 percent rise in consumer spending. Adjusting for inflation, purchases fell 0.3 percent last month, the most since September 2009, according to the Commerce Department data.
“I don’t think we are getting the spurs we need from fundamentals to push oil higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market has a hard time attracting fresh buyers with U.S. inventories near record highs.”
U.S. crude inventories increased as domestic output stayed at the highest level since 1986. A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked oil trapped in shale formations in North America. Stockpiles rose to 399.4 million barrels on April 25, the most since the EIA, the Energy Department’s statistical arm, began publishing weekly data in 1982.
“Total stocks are high, so there shouldn’t be any strong fundamental reason for prices to move too much higher,” Tony Machacek, a broker at Jefferies Bache Ltd. in London, said by e-mail.
Russia, the world’s biggest energy exporter, has withdrawn a majority of its military forces from the Ukrainian border, Rear Admiral John Kirby, a Pentagon spokesman, said today.
About seven battalions of Russian troops, or “several thousands,” remained in the Ukrainian border area, Kirby told reporters traveling to Singapore with U.S. Defense Secretary Chuck Hagel.
“The Russians pulled their troops back and that probably diminished some geopolitical risk,” McGillian said.
WTI gained 3 percent in May, the first increase in three months, as inventories at Cushing, Oklahoma, the delivery point for New York futures, dropped to a five-year low May 23. Stockpiles at the hub have decreased 48 percent since January as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from Cushing.