By Ben Sharples - Sep 15, 2011 9:34 AM GMT+0700
Oil dropped for a second day in New York as investors bet that increasing U.S. fuel stockpiles and signs of a weakening economy indicate demand will falter in the world’s biggest crude-consuming nation.
Futures declined as much as 0.7 percent after an Energy Department yesterday showed gasoline supplies rose 1.94 million barrels last week, the biggest increase since June. U.S. data today may show industrial production stalled in August, according to a survey of economists by Bloomberg News.
“The impact a weak U.S. economy is going to have on the oil price is probably largely factored in but if the outlook gets gloomier you’ll probably see more response there,” said David Land, head of analysis at CMC Markets Ltd. in Sydney.
Crude for October delivery decreased as much as 59 cents to $88.32 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.68 at 12:29 p.m. Sydney time. The contract yesterday slid $1.30, or 1.4 percent, to $88.91. Prices are 17 percent higher the past year.
Brent oil for October settlement fell 55 cents, or 0.5 percent, to $111.85 a barrel on the London-based ICE Futures Europe exchange. The contract expires today. The more-active November future was down 29 cents at $109.36. Brent was at a premium of $23.26 to U.S. futures, compared with a record close of $26.87 on Sept. 6.
Death Cross
Oil in New York is also declining after a so-called “death cross” formed on the technical chart yesterday, when the 100- day moving average slipped below the 200-day mean, according to data compiled by Bloomberg. Investors tend to sell when a shorter moving average crosses below a longer one.
Societe Generale SA’s global asset allocation team went “underweight” on commodities, saying the asset class is in the “danger zone.” The team recommended that investors position for higher gold prices and lower oil prices in a report distributed yesterday by the Paris-based bank.
U.S. industrial production was probably unchanged last month compared with July, according to the Bloomberg survey before the Federal Reserve report today. That would be the weakest performance since factory output declined in April.
Gasoline stockpiles were forecast to fall, according to a Bloomberg News survey of analysts before yesterday’s Energy Department report. Consumption of the motor fuel dropped 1.2 percent to 8.85 million barrels a day in the week ended Sept. 9, the lowest since May, the report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 1.71 million barrels to 158.5 million, the highest level since February.
Storm Impact
Total crude inventories slid 6.7 million barrels to 346.4 million as Tropical Storm Lee closed platforms in the Gulf of Mexico, which accounts for 27 percent of U.S. supply. As much as 61 percent of production was shut, the Bureau of Ocean Energy Management, Regulation and Enforcement said on its website.
Bermuda’s weather service issued a hurricane watch as Tropical Storm Maria strengthened on a path that will take it west of the island today, according to the National Hurricane Center. Canadian offshore facilities operated by Exxon Mobil Corp., Royal Dutch Shell Plc and Hibernia Management & Development Co. are close to the storm’s projected path.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
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