WTI Crude Falls From Two-Week High as China Factory Output Slows

Jan 20, 2014 3:43 pm ET

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Jan. 20 (Bloomberg) -- West Texas Intermediate crude slid from the highest closing price in two weeks amid slowing economic growth and weaker industrial output in China, the world’s second-biggest oil consumer.

Futures lost as much as 1 percent in New York. Factory production rose by 9.7 percent in December, the slowest expansion in five months, according to China’s National Bureau of Statistics. Iran’s Atomic Energy Organization chief welcomed the start of the implementation of an interim nuclear deal with world powers that will see the Gulf state curb its atomic program in exchange for sanctions relief.

“The modest, tepid Chinese economic data surprised investors and is bringing more uncertainty about the prospects for the Chinese economy in the medium term,” said Myrto Sokou, senior analyst at Sucden Financial Ltd. London. “Signs about the situation with Iran’s nuclear program are also going to provide momentum in the coming days.”

WTI for February delivery fell as much as 94 cents to $93.43 a barrel in electronic trading on the New York Mercantile Exchange and was down 0.7 percent at $93.72 when trading ended at 1:15 p.m. New York time. The contract, which expires tomorrow, climbed 41 cents to $94.37 on Jan. 17, the highest close since Jan. 2. The more-active March future was down 56 cents at $94.03.

The volume of all contracts traded was 83 percent below the 100-day average. Floor trading was closed for the Martin Luther King Jr. holiday in the U.S. and transactions will be booked with tomorrow’s trades.

Brent Slips

Brent for March settlement sank 13 cents to $106.35 a barrel after dropping as much as 67 cents on the London-based ICE Futures Europe exchange, on volume that was 55 percent below the average. The European benchmark crude was at a $12.32 premium to WTI for the same month.

Iran, fifth-biggest member in the Organization of Petroleum Exporting Countries, “will voluntarily suspend the enrichment of uranium at a 20 percent level” in its Natanz and Fordo facilities, Ali Akbar Salehi said in an interview on state television, according to the Iranian Students News Agency.

China’s economy expanded by 7.7 percent in the October- December period from a year earlier, compared with 7.8 percent in the third quarter, according to the statistics bureau in Beijing. Annual expansion of 7.7 percent in 2013 was the same pace as the previous year, which was the weakest since 1999.

China ’Key’

“China is the key” in the short term, said Robin Mills, the head of consulting at Manaar Energy Consulting and Project Management in Dubai. “It’s very important to watch for any sign of weakness. I think demand there is much more sensitive than in the U.S. and Europe.”

Annual oil demand in China will increase to 500 million metric tons from 490 million in 2013, Bo Qiliang, a vice president at PetroChina Co., said today in an interview while attending an energy conference in Doha.

WTI on Jan. 17 capped its first weekly gain since December amid signs the U.S., the largest oil user, will sustain its economic growth.

Large speculators reduced bullish bets on WTI by 17,455 futures and options combined to 229,722 in the week ended Jan. 14, according to the Commodity Futures Trading Commission. That’s the lowest level since Nov. 26. Long positions held by money managers, including hedge funds, commodity pools and commodity-trading advisers decreased by 7,066 futures and options combined, while so-called shorts climbed by 10,389.

Hedge Funds

Hedge funds and other money managers reduced bullish bets on Brent crude to the lowest level in 14 months, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 85,658 lots in the week ended Jan. 14, ICE said today in its weekly Commitments of Traders report. The cut of 14,438 contracts, or 14 percent, is the second weekly reduction and brings net-longs down to their lowest since Nov. 13, 2012.

Ultra low sulfur diesel for February delivery gained 1.13 cents, or 0.4 percent, to $3.035 a gallon on Nymex on volume that was 73 percent below the 100-day average. February gasoline futures were up 1.15 cents at $2.6319 a gallon. Trading volume was 83 percent below the 100-day average.

Regular gasoline at U.S. pumps, averaged nationwide, fell 0.3 cent to $3.287 a gallon, a ninth consecutive decline, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring company. Prices are 2 cents below a year ago.

The International Energy Agency, an adviser to oil- consuming nations, will publish its monthly market report tomorrow with forecasts of oil supply and demand for the coming year at 10 a.m. in Paris.

--With assistance from Ben Sharples in Melbourne, Nayla Razzouk in Dubai and Edward Welsch in Calgary. Editor: David Marino