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Crude oil futures decline

May 16th, 2013

Crude Oil – West Texas Intermediate crude fell for the fifth time in six days amid signs of economic weakness in the U.S. and Europe that threaten fuel demand.

Crude oil futures slid as much as 0.4 percent in New York. U.S. industrial production dropped the most in eight months in April, manufacturing in the New York region unexpectedly shrank in May and the euro-area economy contracted more than forecast in the first quarter. A measure of U.S. fuel consumption declined by 584,000 barrels last week to 18.5 million barrels a day, Energy Information Administration data yesterday showed.

“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.”

WTI for June delivery lost as much as 39 cents to $93.91 a barrel in electronic trading on the New York Mercantile Exchange and was at $93.98 at 12:31 p.m. in Singapore. The volume of all contracts traded was 17 percent above the 100-day average. Prices erased a drop of as much as 2.2 percent yesterday to close 9 cents higher at $94.30 as investors speculated central banks will act to boost their economies.

Brent for June settlement, which expires today, slid as much as 45 cents, or 0.4 percent, to $103.23 a barrel on the London-based ICE Futures Europe exchange. The more actively traded July future was down 33 cents at $103.17. The European benchmark crude was at a premium of $9.31 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.

Crude Oil: Fuel Demand

U.S. gasoline consumption slid 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 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.
Europe Contraction

Output at U.S. factories, mines and utilities in April decreased 0.5 percent after a revised 0.3 percent gain in March that was 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 European Union accounted for 16 percent of the global oil consumption in 2011, according to BP Plc (BP/)’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.

- Paul Gordon in Hong Kong and Winnie Zhu in Singapore at Bloomberg.