Crude Oil Falls on Concern Recession to Sap Demand for Fuels

By Christian Schmollinger

April 20 (Bloomberg) -- Crude oil fell on concern inventories will rise as the global recession saps demand for fuels in the U.S., the world’s biggest energy user.

A U.S. Commerce Department report on April 24 may show orders for durable goods such as refrigerators and computers declined for the fifth time in six months in March, according to a Bloomberg News survey of economists. Crude-oil inventories are at 366.7 million barrels, the highest since September 1990, the Energy Department said on April 15.

“The U.S. is clearly the economy we have to look at to see how the demand side of the equation is working,” said Geoff Clear, the head of Asia Commodities for Australia & New Zealand Banking Group Ltd. in an interview with Bloomberg Television in Singapore. “With that in mind we’ve seen stockpiles growing and we aren’t seeing signs that these builds are being tempered.”

Crude oil for May delivery fell as much as $1.03, or 2.1 percent, to $49.30 a barrel in electronic trading on the New York Mercantile Exchange. It was at $49.50 a barrel at 2:34 p.m. Singapore time. Prices are up 11 percent this year.

The May contract expires tomorrow. The more-active June futures were down 82 cents, or 1.6 percent, to $51.65 a barrel, at 2:36 p.m. Singapore time.

“The uncertain demand outlook is going to continue to dominate the outlook for crude,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “The fundamentals really haven’t shown any improvement.”

China’s Demand

Crude rose on April 17 on reports that oil refiners in China, the world’s second-largest crude consumer, increased their output last month. The country refined 29.4 million metric tons of crude, or about 6.92 million barrels a day, in March, the China Mainland Marketing Research Co. said in a statement April 17. That’s up 0.7 percent from a year earlier.

Still, China’s gross domestic product increased 6.1 percent in the first quarter, the slowest pace in 10 years, a sign that oil-demand growth could be tempered by the global recession.

“China’s GDP number was slightly weaker than expected last week,” said Commodity Warrants’ Hassall. “We are looking to China as well as India to underpin demand as a lot of the industrialized nations contract.”

Oil prices around $50 a barrel will help the economy recover, according to Mohamed al-Hamli, the oil minister of the United Arab Emirates.

OPEC is concerned about oil demand uncertainty and maintaining crude prices at reasonable levels is vital, he said.

U.S. fuel demand in the first quarter fell to the lowest for the period in 11 years, the American Petroleum Institute said in a monthly report on April 16. Deliveries of petroleum products, a measure of consumption, averaged 19.2 million barrels a day, 3.4 percent less than during the same period in 2008, the industry-funded API said.

Angola Loadings

Angola, Africa’s second-largest producer, will increase daily crude shipments, including the Palanca grade, by 7.3 percent in June as OPEC’s output cuts stall.

BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies are scheduled to load an average of 1.83 million barrels a day in June, compared with May’s 1.7 million barrels a day, according to loading programs released through today.

Angola’s output totaled 1.6 million barrels a day in March, according to a Bloomberg survey of analysts, traders and producers. That’s 103,000 barrels a day over their quota, set by the Organization of Petroleum Exporting Countries.

“It’s unlikely that you’ll get 100 percent compliance,” said Hassall. “Given the lift we’ve seen in oil prices there is a greater incentive to cheat on those quotas.”

Brent crude oil for June settlement fell as much as 90 cents, or 1.7 percent, to $52.45 a barrel on London’s ICE Futures Europe exchange. It was at $52.61 at 2:37 p.m. Singapore time.

Hedge-fund managers and other large speculators decreased their net-long positions in New York crude-oil futures in the week ended April 14, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 4,962 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 7,531 contracts, or 60 percent, from a week earlier.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net;