Oil Drops From Highest Price in a Week on Concern Economic Growth to Slow

By Jacob Adelman - Mar 12, 2012 8:20 AM GMT+0700

Oil fell from the highest price in more than a week in New York on speculation fuel demand will falter after Chinese export data signaled an economic slowdown.

Futures slid as much as 0.5 percent. China had its biggest trade deficit in at least 22 years last month, a March 10 report by the customs bureau showed. Overseas shipments rose 18.4 percent, compared with a median estimate of 31.1 percent in a Bloomberg News survey. Crude imports climbed to a record 5.87 million barrels a day on seasonal agricultural demand and as the nation fills emergency storage reserves.

“The data from China is a downside pressure on the oil market, said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo. ‘‘The trade deficit is much bigger than expected.’’

Crude for April delivery fell as much as 55 cents to $106.85 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.87 at 10:17 a.m. Tokyo time. The contract climbed 82 cents to settle at $107.40 a barrel on March 9, the third day of gains and the highest close since March 1. Prices are up 8.1 percent this year.

Brent oil for April settlement slid 49 cents to $125.49 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $18.62 to New York-traded West Texas Intermediate grade, compared with a record $27.88 on Oct. 14.

China Slowdown

China’s trade deficit follows reports last week that showed the weakest January-February factory-production gain since 2009 and retail sales below the median economist estimate. China was the second-biggest oil consumer in 2010 with about 11 percent of global demand, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. accounted for 21 percent.

The nation’s crude imports beat the previous record of 5.6 million barrels a day in September 2010 and 5.46 million in January, according to Bloomberg calculations from data released March 10 by the Beijing-based General Administration of Customs. Fuel demand typically rises during the nation’s spring planting season that begins this month. The country also started filling emergency petroleum reserve tanks at Lanzhou in the northwest, Yu Baocai, a vice president at China National Petroleum Corp., said March 7.

Crude prices may fall this week as calls for negotiations between nuclear powers and Iran may reduce tension that’s helped bolster crude prices this year, a Bloomberg News survey showed. Fourteen of 28 analysts, or 50 percent, forecast oil will fall through March 16. Ten respondents, or 36 percent, predicted prices will rise and four estimated there will be little change.

Hedge Fund Bets

Hedge funds reduced bullish bets on oil for the first time in five weeks, pushing prices to the lowest level since mid- February, as concern about conflict with Iran decreased. Large speculators cut wagers on rising prices by 7.3 percent in the week ended March 6, falling from a 10-month high, according to the Commodity Futures Trading Commission’s Commitments of Traders report on March 9.

President Barack Obama said on March 6 that there is a ‘‘window of opportunity” for diplomacy and sanctions to compel Iran to give up any effort to develop nuclear weapons. Catherine Ashton, the European Union’s foreign policy chief, said March 6 that world powers are ready to resume talks with Iran over its disputed nuclear work.

Iran will never bow to international military threats, the official state television station reported President Mahmoud Ahmadinejad as saying yesterday.

To contact the reporter on this story: Jacob Adelman in Tokyo at jadelman1@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net