West Texas Intermediate crude retreated from the highest price since October after a Chinese manufacturing index declined to a seven-month low, signaling demand may slow from the world’s second-biggest oil consumer.
Futures for April, the most-active contract, dropped as much as 0.4 percent in New York. The preliminary February reading of 48.3 for a Purchasing Managers’ Index in China released today by HSBC Holdings Plc and Markit Economics compares with 49.5, January’s final figure and the median estimate in a Bloomberg News survey. A technical indicator shows WTI’s 3 percent gain since Feb. 14 may have been excessive.
“The poor Chinese manufacturing PMI data triggered further concerns over a slowdown in the oil demand from China,” Myrto Sokou, senior analyst at Sucden Financial Ltd. in London, said in an e-mail.
WTI for April delivery slid as much as 39 cents to $102.45 a barrel in electronic trading on the New York Mercantile Exchange, and was at $102.70 as of 9:34 a.m. London time. The March contract, which expires today, rose 0.9 percent to $103.31 yesterday, the highest settlement since Oct. 8. The volume of all futures traded was 3 percent above the 100-day average.
Brent for April settlement lost as much as 69 cents, or 0.6 percent, to $109.78 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.32 to WTI for the same month on ICE. The spread settled at $7.63 yesterday.
“What we’re seeing is a reaction to the news from China,” said Ric Spooner, a chief analyst at CMC Markets in Sydney who predicts investors may buy WTI contracts if prices slide to $99.70 a barrel. “It comes at a time when we’ve seen some strong upward movement over the past couple of weeks, so that increases the vulnerability of the market.”
WTI settled above the 30-day upper Bollinger Band for a second day yesterday, signaling further increases may not be sustainable, according to data compiled by Bloomberg. This level is about $103.50 today. Investors typically sell contracts when a market is overbought.
Crude has advanced for the past five weeks through Feb. 14 as cold weather boosted energy demand and inventories at Cushing in Oklahoma, the delivery point for New York-traded contracts, shrank to the lowest level since November.
Supplies at Cushing decreased by 1.82 million barrels in the week ended Feb. 14, the industry-funded American Petroleum Institute reported yesterday. TransCanada Corp. began moving oil from the storage hub to Texas on the southern portion of its Keystone XL pipeline in January.
“The draw at Cushing is showing that everything is working,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney. “The snap in cold weather is having an affect on the market. The trend is for oil to trade higher” while there are low temperatures, he said.
Distillate stockpiles, including heating oil and diesel, declined by 676,000 barrels last week, the API said inWashington. An Energy Information Administration report today will probably show supplies fell by 2.1 million, according to the median estimate of 10 analysts in a Bloomberg News survey.
Temperatures across the U.S. will plummet through next week and the cold will linger through the start of March, according to Matt Rogers, the president of Commodities Weather Group LLC in Bethesda, Maryland. Readings for the Midwest and Great Lakes region including Chicago are expected to drop 15 degrees Fahrenheit (9 Celsius) below normal from Feb. 24 to Feb. 28, he said. In the Northeast, temperatures are forecast to be at least 8 degrees lower than the norm.
Total U.S. crude stockpiles slid by 473,000 barrels, according to the API. Supplies are projected to climb by 2.25 million, the Bloomberg poll shows before the report from the EIA, the Energy Department’s statistical arm. Gasoline inventories rose by 1.39 million, compared with an estimated 850,000 decrease in the survey.