WTI Oil Falls in Survey on Concern Emerging Markets to Slow

Jan 31, 2014 4:01 pm ET

(Updates with settlement prices in eighth paragraph.)

Jan. 31 (Bloomberg) -- West Texas Intermediate crude will probably decline next week on concern that emerging economies will slow, curbing fuel demand, according to a Bloomberg survey.

Seventeen of 31 analysts, or 55 percent, forecast crude will decrease through Feb. 7. Eight respondents, or 26 percent, projected prices will gain, and six said there will be little change. Last week, 47 percent of analysts projected a drop.

U.S. equities fell to a two-month low on Jan. 29 as investors pulled money at the fastest rate on record from exchange-traded funds that track emerging markets, amid cuts to central-bank stimulus and slowing growth in China. More than $7 billion flowed from ETFs investing in developing-nation assets in January, the most since the securities were created, data compiled by Bloomberg show.

“Oil and equities are being tossed around by concerns over whether emerging markets will be OK,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “I don’t believe the turmoil is over. Growth in emerging economies has become dependent on Fed easing and Chinese growth, neither of which can be counted on.”

Emerging economies have benefited from cheap money as three rounds of Federal Reserve bond-buying pushed capital into their borders in search of higher returns. The central bank began paring the purchases by $10 billion to $75 billion this month and announced plans Jan. 29 to reduce the amount by another $10 billion.

Chinese Slowdown

A Chinese Purchasing Managers’ Index fell to 49.5 from 50.5 in December, HSBC Holdings Plc and Markit Economics said in a Jan. 29 statement. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.

U.S. crude supplies surged 6.42 million barrels to 357.6 million last week, an Energy Information Administration report on Jan. 29 showed. It was the biggest increased since the seven days ended Oct. 4.

Front-month crude futures rose 85 cents, or 0.9 percent, to $97.49 a barrel this week on the New York Mercantile Exchange. Yesterday’s settlement was the highest since Dec. 31. Futures rose 0.9 percent this week and dropped 0.9 percent this month. prices are unchanged from a year ago.

The oil survey has correctly predicted the direction of futures 51 percent of the time since its start in April 2004.

     Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                    RISE      NEUTRAL    FALL
                      8          6        17

--With assistance from Grant Smith in London, Ann Koh and Winnie Zhu in Singapore and Ben Sharples in Melbourne. Editors: Margot Habiby, Richard Stubbe