Oil dropped from a two-year high in New York as signs of slowing economic growth in China prompted traders to sell contracts after the biggest two-day rally since May. Brent crude traded above $100 a barrel for a second day.
Oil rose 7.7 percent in the two days through yesterday as civil unrest in Egypt raised concern supplies through the Suez Canal may be disrupted. Futures pared some of those gains today after manufacturing growth in China, the world’s biggest energy user, slowed in January. U.S. stockpiles probably were up for a third week, according to a Bloomberg News survey.
“Not a lot of people are thinking that crude oil will keep this level for a long time,” said Ken Hasegawa, a commodity derivative sales manager at broker Newedge in Tokyo. “The market was softened earlier by profit-taking.”
Crude for March delivery dropped as much as 64 cents, or 0.7 percent, to $91.55 a barrel in electronic trading on the New York Mercantile Exchange. It was at $91.76 a barrel at 4:47 p.m. Singapore time. Yesterday, prices rose to $92.19, the highest settlement since Oct. 3, 2008. Futures gained 0.9 percent in January and 24 percent over the past year.
Brent for March settlement dropped as much as 73 cents, or 0.7 percent, to $100.28 a barrel on the ICE Futures Europe exchange in London. It traded at $101.73 yesterday on an intraday basis, the highest since Sept. 29, 2008.
China’s Purchasing Managers’ Index fell to 52.9 from 53.9 in December, the China Federation of Logistics and Purchasing said in a statement on its website. That was less than the median estimate of 53.5 in a Bloomberg News survey of 11 economists.
Egypt Unrest
Futures gained 3.2 percent yesterday as opposition groups demanding Egyptian President Hosni Mubarak’s ouster urged more people onto the streets. About 2.5 percent of global oil production is shipped through Egypt via the Suez Canal and the adjacent Suez-Mediterranean Pipeline, according to Goldman Sachs Group Inc.
Ships are passing normally through the canal, which is handling 45 to 50 vessels a day, said Ahmed El Manakhly, the head of traffic for the Suez Canal Authority, the waterway’s operator.
“At some point, traders will want to count the barrels actually lost because of the demonstrations, and we may get to that point and discover there weren’t any,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in a note.
OPEC Supplies
The Organization of Petroleum Exporting Countries would increase output if the unrest in Egypt disrupts supplies from the Middle East, Secretary-General Abdalla el-Badri said in London yesterday. Crude prices at $70 to $80 a barrel are “appropriate,” Saudi Arabian Oil Minister Ali al-Naimi said at a conference in Geneva yesterday.
“A lot of producing countries like OPEC are saying every day that a lot of crude oil is available, there is no shortage,” Newedge’s Hasegawa said. “WTI is very weak because of high inventories.’”
An Energy Department report tomorrow may show that U.S. crude inventories climbed by 2.5 million barrels last week from 340.6 million, according to the median of 11 analyst estimates in a Bloomberg News survey. The industry-funded American Petroleum Institute will report its own data today.
The premium of Brent over WTI futures was at $8.86 a barrel at 4:58 p.m. in Singapore after surging to $11.75 a barrel on Jan. 27. The spread may eventually stabilize at $8 to $10 a barrel, Hasegawa said.
To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
