Brent Slips a Second Day Amid Signs of Slowing Chinese Growth
By Grant Smith and Ben Sharples - Apr 29, 2013
Brent crude fell for a second day as investors speculated that slower growth in China will curb fuel demand in the world’s biggest energy consumer.
The benchmark, used to price more than half of the world’s oil, lost as much as 0.6 percent. Net income at Chinese industrial companies increased 5.3 percent in March from a year earlier, compared with 17 percent growth in the first two months, the Beijing-based National Bureau of Statistics said April 27. OPEC’s reference price rebounded above $100 a barrel for the first time in two weeks.
“We don’t expect the out-of-this-world upward race in Chinese oil demand, which we saw in the fourth quarter,” said Michael Poulsen, an analyst at Global Risk Management in Middlefart, Denmark. “However, we do expect oil demand to pick up in the months ahead.”
Brent for June settlement declined as much as 59 cents to $102.57 a barrel on the London-based ICE Futures Europe exchange, and was at $102.99 at 9:11 a.m. local time. The front- month contract was at a premium of $9.86 to West Texas Intermediate futures, from $10.16 on April 26.
WTI for June delivery was at $93.13 a barrel, up 13 cents, in electronic trading on the New York Mercantile Exchange at. The volume of all contracts traded was 12 percent below the 100- day average.
‘Economic Risk’
Morgan Stanley is “skeptical” that the spread between WTI and Brent can fall on a sustained basis, the bank said in a report e-mailed today. Any significant narrowing would be a selling opportunity as differentials will probably widen again throughout the year, it said.
The basket of 12 crude grades used as a reference by the Organization of Petroleum Exporting Countries also rose above $100 for the first time since April 12. The basket was at $100.70 on April 26, according to an e-mail today from the group’s Vienna-based secretariat.
Brent at $100 a barrel “is more reasonable-looking at the fundamentals,” Robin Mills, the head of consulting at Dubai- based Manaar Energy Consulting and Project Management, said yesterday. “Some of the geopolitical risk has come off and the economic risk is to the downside for prices.”
Technical Trend
Net-long positions in WTI crude held by money managers, including hedge funds, commodity pools and commodity-trading advisers, dropped in the week ended April 23, according to the Commodity Futures Trading Commission’s April 26 Commitments of Traders report. They fell by 624 futures and options combined to 182,408, the CFTC report showed. Similar data for Brent will be released at midday London time.
WTI may extend losses as an indicator of technical momentum falters. The 50-day moving average, at $92.65 a barrel today, has dropped below the 100-day moving average for the first time in three months, according to data compiled by Bloomberg. Investors typically sell contracts on a “death cross,” when a moving average falls below a longer-term one. The 50-day average is about 84 cents above the 200-day mean, the smallest premium since February.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
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