Oil dips as China data outweighs upbeat U.S. consumers

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Oil fell on Friday and posted a second straight weekly loss as pressure from weak industrial growth in China countered news that U.S. consumer confidence hit a four-year high.

Brent crude's 6.2 percent slide in the past two weeks was the biggest two-week percentage loss since Dec. 16. U.S. crude fell 8.4 percent the past two weeks, its largest since Sept. 30. Crude prices felt early pressure from data showing China's industrial production in April grew at its slowest pace in nearly three years.

The report followed disappointing trade numbers released on Thursday, indicating China's economy is showing vulnerability to a global slowdown. Oil pared losses later on news that U.S. consumer sentiment rose early this month to its highest in more than four years, according to the Thomson Reuters/University of Michigan preliminary May reading.

The consumer data lent support to the U.S. equities intraday, before they ended lower. The stock market's resilience even after news of JPMorgan Chase & Co's trading loss of at least $2 billion also initially helped curb oil losses. "The complex was pushed and pulled in both directions today by the opposing forces of risk aversion related to the losses in the banking segment and support that spun off of the early rebound in the equities," Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.

Oil prices have been battered by rising OPEC output that has helped boost U.S. crude oil inventories and by the political and economic turmoil resulting from the euro-zone's debt crisis. Iran's dispute about its nuclear program with the West and an European Union embargo on Tehran's oil set for July sent prices soaring in the first quarter. The potential for supply disruption remains, but revived talks between Iran and major powers have eased oil's geopolitical fear premium.

Brent June crude slipped 47 cents to settle at $112.26 a barrel, after falling to $111.40. Its loss for the week was 0.81 percent.

U.S. June crude fell 95 cents to settle at $96.13, below the 200-day moving average of $96.27, having dropped as low as $95.61 intraday. The Thomson Reuters-Jefferies CRB index, settled nearly 1 percent lower, off almost 2 percent for the week. The CRB's two-week slide was the biggest of the year at 5 percent, Reuters data showed.

Brent's relative strength index (RSI) hovered at 26, with the U.S. crude RSI at 29. A reading below 30 suggests an oversold condition to investors watching technical indicators. The Brent/U.S. crude spread widened, with Brent's premium to its U.S. counterpart ending at $16.13 a barrel based on settlements, up from $15.65 the previous session.

Money managers cut their net long U.S. crude futures and options positions sharply in the week to May 8, the U.S. Commodities Futures Trading Commission said on Friday. Friday's seesaw price trajectory came as total crude trading volumes remained lackluster. Brent volume outpaced U.S. turnover but dealings for both contracts were below 30-day averages.

The euro seesawed against the U.S. dollar, but the dollar index held its gains. A stronger U.S. currency can weigh on dollar-denominated oil by making it more expensive for consumers using other currencies.

CHINA SYNDROME
Along with China's slowing industrial growth, the world's No. 2 oil consumer has pared its demand for petroleum. China's implied oil demand fell to a six-month low in April and posted the first year-on-year decline in at least three years, according to Reuters calculations based on preliminary government data.

The data highlight the potential effect China faces from the ongoing crisis in the euro zone. Spain and France came under intense pressure from the European Commission on Friday to deepen their deficit cuts as anxiety mounted over Greece's ability to stay in the euro zone as efforts to form a government continued in Athens after last Sunday's inclusive election.

Global oil demand growth this year will remain broadly unchanged, the International Energy Agency (IEA) said in its monthly report, raising it by just 20,000 bpd from its previous report to 790,000 barrels per day.

The IEA expects prices to remain high due to the tensions over Iran's nuclear program, even with rising world supply and the resulting big boost to inventories.

(Additional reporting by Gene Ramos in New York, Zaida Espana in London and Manolo Serapio Jr, Randy Fabi and Manash Goswami in Singapore; Editing by David Gregorio and Sofina Mirza-Reid)



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


Discbine® 313 Disc Mower-conditioner

New Holland has taken the Discbine® disc mower-conditioner to a new level of durability and function with two new center-pivot ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Leads to Insight