WTI Crude Advances Amid Signs China Slowdown Stabilizing

Brent crude declined for a second day as Libya reopened a terminal closed by protests, while Iranian President Hassan Rohani pledged in his inaugural speech to shun extremism and take a moderate approach.

Futures dropped as much as 1.1 percent. Libya’s Marsa el Hrega port reopened and the first crude cargo was exported Aug. 1, according to Naji Mokhtar, the head of the parliamentary energy committee. In Iran, Rohani took his oath of office yesterday, saying the U.S. and the European Union should end sanctions aimed at stopping the Persian Gulf nation’s nuclear enrichment program, which have curbed its oil exports.

“Some rapprochement between Iran and the U.S.” could weigh on prices, said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “Brent dropped below $106 last week and could head there again soon.”

Brent for September settlement lost as much as $1.22 to $107.73 a barrel on the London-based ICE Futures Europe exchange and traded at $107.80 as of 1:02 p.m. London time. The European benchmark was at a premium of $1.91 a barrel to WTI. The spread was at $2.01 on Aug. 2, widening for the first time in three days.

WTI for September delivery was at $105.93 a barrel in electronic trading on the New York Mercantile Exchange, down $1.01. It earlier gained as much as 0.7 percent. The volume of all futures traded was 13 percent below the 100-day average.

China Confidence

Oil advanced earlier after China’s non-manufacturing Purchasing Managers’ Index showed the first acceleration since March, according to government data on Aug. 3. The index rose to 54.1 in July from 53.9. The advance follows an unexpected increase in a factory index last week and may bolster confidence that Premier Li Keqiang’s policies are helping to prevent a deeper slowdown.

“China has been engaged on a deliberate slow-down policy, seeking to engineer a soft landing,” said Guy Wolf, global head of market analytics at Marex Spectron Group in London. “What is helping is that the U.S. is growing and Europe is bouncing off the bottom.”

Libyan Exports

All but one of Libya’s terminals were shut in July because of a labor disputes. A member of the Organization of Petroleum Exporting Countries, Libya has lost an estimated 4.5 million barrels of crude and 190,000 barrels of condensate shipments, analysts at Goldman said in an e-mailed report on Aug. 2.

The Es Sider, Ras Lanuf, Marsa Brega and Zueitina terminals remain closed, Mokhtar, the head of the parliamentary energy committee, said on Aug. 3.

Libya, holder of Africa’s largest crude reserves, is currently pumping 700,000 barrels a day, then rising to 800,000 barrels next month, Oil Minister Abdulbari Al-Arusi said today at a press conference in Tripoli. The nation has output capacity of about 1.6 million barrels, data compiled by Bloomberg show.

Iran’s government will take “fundamental steps to elevate Iran’s position based on national interest and the lifting of the oppressive sanctions,” Rohani said in his speech. The U.S. said it will be “a willing partner” if Iran chooses to work toward a peaceful solution to the nuclear issue.

Hedge funds reduced net-long positions on WTI by 15,275 futures and options combined, or 4.6 percent, to 318,819 in the seven days ended July 30, according to the Commodity Futures Trading Commission’s weekly report on Aug. 2. That was the first decline in five weeks.

Money managers reduced bullish bets on Brent for the first time in five weeks, data from ICE Futures Europe show.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 181,335 lots in the week ended July 30, the London-based exchange said today in its weekly Commitments of Traders report. That amounts to a reduction of 10,098 lots, or 5.3 percent, from the five-month high reached last week.

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