WTI Oil Retreats as China’s Manufacturing Slowing

West Texas Intermediate fell for the second day in three after fluctuating amid data showing a slowdown in China’s manufacturing in July and shrinkage in crude stockpiles in the U.S., the world’s largest oil consumer.

Futures retreated 0.6 percent in New York after rising 0.3 percent yesterday. U.S. crude inventories fell by 1.44 million barrels last week, the industry-funded American Petroleum Institute said yesterday. An Energy Information Administration report today will probably show supplies dropped by 2.8 million, according to a Bloomberg News survey. Euro-area manufacturing expanded in July, London-based Markit Economics said today, while a preliminary gauge of China’s manufacturing trailed forecasts.

“Crude oil continues to look well-supported on the back of concerns about declining inventories,” said Michael Hewson, a London-based market analyst for CMC Markets Plc. “A slightly more positive bias to European PMIs may also be helping on the margins, but concerns about Chinese growth remain a concern.”

WTI for September delivery was at $106.58 a barrel, down 65 cents, in electronic trading on the New York Mercantile Exchange at 1:55 p.m. London time. The volume of all futures traded was 31 percent less than the 100-day average. The contract climbed 29 cents to $107.23 yesterday, the highest close since July 19, after a 0.9 percent decline on July 22.

Brent for September settlement lost $1.01 to $107.41 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of 80 cents to WTI, from $1.19 yesterday. Brent slid below the U.S. grade in intraday trading on July 19 for the first time since August 2010.

Fuel Supplies

U.S. gasoline stockpiles increased by 1.65 million barrels in the week ended July 19, according to the median estimate of 12 analysts surveyed by Bloomberg before the EIA report. Supplies declined by 889,000 barrels, the API said yesterday.

Distillate inventories, a category that includes heating oil and diesel, gained by 1.85 million barrels, the survey shows. Stockpiles decreased by 710,000 barrels, according to the industry data. The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.

The China manufacturing gauge released today by HSBC Holdings Plc and Markit Economics was at 47.7, according to a preliminary survey of purchasing managers. Readings below 50 indicate contraction.

Europe Manufacturing

China was the second-largest oil user last year, accounting for about 11 percent of global demand, according to the International Energy Agency. The U.S. consumed 21 percent.

Euro-area manufacturing rose unexpectedly in July for the first time in two years, led by Germany, adding to signs the currency bloc’s economy is emerging from a record-long recession. An index based on a survey of purchasing managers rose to 50.1 from 48.8 in June, Markit Economics said. A reading above 50 indicates growth.

The euro-area economy, which has contracted for six quarters, will return to growth this quarter, according to a separate Bloomberg survey of economists.

WTI’s advance is stalling as a measure of technical momentum slows. The 14-day moving average convergence-divergence indicator has pared a premium to its signal line to the narrowest since July 1, according to data compiled by Bloomberg. Investors typically sell contracts when the difference turns into a discount.

Asian nations are scheduled to reduce imports of West African crude for August loading to the lowest level in 13 months because of a wider spread between Brent and Dubai grades.

Refiners bought 1.52 million barrels a day from Angola, Nigeria, Equatorial Guinea, Republic of Congo and Gabon, the least since July 2012, according to a survey of nine traders and an analysis of loading plans obtained by Bloomberg. That’s down from an estimated 1.53 million barrels for July.

Sherry Su in London at lsu23@bloomberg.net;

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