WTI Crude Recovers After Falling on Signs of Weaker Fuel Demand

West Texas Intermediate gained after falling for the fifth time in six days amid signs of economic weakness in the U.S. and Europe.

Futures recovered following a decline of as much as 1.1 percent in New York. New housing starts in the U.S. fell more than forecast in April to a five-month low, the Commerce Department reported today. U.S. jobless claims jumped by 32,000 to 360,000 last week, the most since the end of March, Labor Department figures showed today. The euro-area economy contracted more than forecast in the first quarter. A measure of U.S. fuel use fell by 584,000 barrels a day last week to 18.5 million barrels a day, Energy Information Administration data showed yesterday.

The international crisis over Iran’s nuclear program, which creates instability in the Middle East, helped support prices today, Bjarne Schieldrop, Oslo-based head of commodity research at SEB AB, said in a telephone interview.

“It doesn’t look tight in the oil market for the coming five years,” Torbjoern Kjus, a senior oil analyst at DNB ASA in Oslo, said by phone. “Spare capacity will rise, and I expect prices to continue to trend lower.”

WTI for June delivery rebounded after losing as much as $1.07 to $93.23 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.76 at 2:00 p.m. in London. The volume of all contracts traded was 85 percent above the 100-day average. Prices yesterday closed 9 cents higher at $94.30, erasing a drop of as much as 2.2 percent, as investors speculated that central banks would act to boost their economies.

Brent Premium

Brent for June settlement, which expires today, rose 48 cents to $104.16 a barrel on the London-based ICE Futures Europe exchange. The contract fell earlier as much as or 0.7 percent, or 73 cents. The more actively traded July future was 40 cents higher at $103.91 a barrel. The European benchmark crude traded at a premium of $9.38 to WTI. The spread was $9.38 yesterday, the widest since April 26. It closed at $7.65 on May 13, the narrowest since January 2011.

“All the key players on the demand side basically see muted growth,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “That will put significant downward pressure on crude prices. The EIA numbers, especially diesel, have shown for the last couple of weeks a weakening trend.”

Housing Starts

U.S. gasoline consumption shrank 1.2 percent last week to 8.34 million barrels a day, the lowest level since March 15, according to the report from the EIA, the Energy Department’s statistics unit. Demand for distillate fuels, including heating oil and diesel, decreased 2.4 percent.

Gasoline stockpiles rose 2.59 million barrels to 217.7 million, the biggest gain since January, the data showed. Supplies were expected to decrease by 1.1 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News. Distillate inventories climbed 2.3 million barrels to 119.9 million, more than a 475,000-barrel gain projected in the survey.

Housing starts slumped 16.5 percent, the most since February 2011, to an 853,000 annualized rate after a revised 1.02 million in March, the Commerce Department reported. The median estimate of 81 economists surveyed by Bloomberg was for a 970,000 rate.

Euro-Area Recession

The increase in jobless claims in the week ended May 11, exceeded forecasts in a Bloomberg survey. The median forecast of 50 economists called for a rise to 330,000.

Output at U.S. factories, mines and utilities in April decreased 0.5 percent and March figures were revised to a 0.3 percent gain, weaker than previously reported, the Federal Reserve said yesterday. Manufacturing in New York, northern New Jersey and Connecticut declined for the first time since January, the Federal Reserve Bank of New York said.

Gross domestic product in the 17-nation euro area fell 0.2 percent in the three months ended March after a 0.6 percent decline in the previous quarter, the European Union’s statistics office in Luxembourg said. That extends the currency bloc’s recession to a record sixth quarter.

The EU accounted for 16 percent of the global oil consumption in 2011, according to BP Plc’s Statistical Review of World Energy. The U.S. is the largest consumer and used 21 percent.

WTI is falling as a measure of technical momentum declines. On the daily chart, the moving average convergence-divergence indicator has almost erased a premium to its signal line, according to data compiled by Bloomberg. Investors typically sell contracts on a so-called bearish MACD crossover. Crude dropped in December, February and April after a similar technical pattern.

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