On Wednesday, U.S. crude oil increased in unstable trading prior to the September contract's expiration. These gains were seen after government data showed crude stocks dropped last week in the United States.
After a measure of Chinese manufacturing missed estimates, Brent crude also declined with West Texas Intermediate. Stockpiles at Cushing, Oklahoma, soared to the highest level since October, as the spread between the grades was close to the widest in two months.
Brent futures down on Chinese data
In London and New York, Brent futures fell as much as 1 percent as preliminary Chinese Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics for August crashed to 50.3. A Bloomberg News survey forecasted a median 51.5.
The October settlement on the London-based ICE Futures Europe exchange for Brent was down as much as $1.07 to $101.21 a barrel and was at $101.31 on Thursday. The contract rose 72 cents to $102.28 yesterday. The volume of all futures traded was about 7 percent below the 100-day average. Prices are down 8.6 percent this year.
"The manufacturing data adds to the disappointing housing data earlier this week, pointing to a possible slowdown in Chinese growth," Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-mail. The contrasting price structures resulted in the widening of the Brent-WTI spread as September contracts expired and "on that basis I see limited upside to the spread from here," he said, as quoted by Bloomberg.
The Bloomberg survey of economists showed the Chinese manufacturing gauge fell below all 22 forecasts. It's fallen from 51.7 for July shown in a final reading and will be at a three-month record low if confirmed on Sept. 1.
Meanwhile, The Economic Times reported crude oil futures in Asian trade dropped by 0.19 percent to Rs 5,688 per barrel due to an ongoing weak trend. At the Multi Commodity Exchange, September crude oil lost Rs 11, or 0.19 per cent, to Rs 5,688 per barrel, with a business volume of 881 lots. The decline in crude oil futures was mostly due to this weakening trend in Asian trade based on easing concerns over conflicts in crude producers Libya and Iraq, which could have meant a major impact on supply.
U.S. crude stocks drop support
According to Reuters, U.S. crude stocks slid by 4.5 million barrels last week. The U.S. Energy Information Administration reported this decline exceeded estimates by analysts. The Energy Information Administration reported yesterday that in the seven days ended Aug. 15, crude inventories at Cushing, the delivery point for WTI, climbed 1.755 million barrels to 20.155 million, according to Bloomberg.
U.S. crude futures have been under a lot of pressure by growing supplies of light-sweet oil from soaring North American output, falling to a seven-month low of $94.26 on Tuesday. September's premium to the October contract came to $3.12 on Wednesday, the most significant price difference in five years between the front and second month contracts.
John Kilduff, partner at Again Capital LLC in New York, said that traders were keeping a close eye on pipeline flows into and out of Cushing. "There has been some outsized volatility over the past several sessions," he said, according to Reuters.
Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania, said the major decline in crude inventories pointed to the fact that refineries are increasing their refinery activity by taking advantage of an arbitrage in diesel exports from the Gulf Coast, reports Reuters.
U.S. September RBOB gasoline futures increased by 0.60 cent at $2.7014, after reaching a peak of $2.7349 a gallon notched ahead of the EIA data.
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