Oil Declines for a Second Day After Reports Show U.S. Economy Is Slowing - Bloomberg

Oil declined for a second day in New York after reports showed U.S. crude supplies rose, companies added fewer jobs than forecast and manufacturing slowed, stoking speculation fuel demand may falter in the world’s biggest crude- consuming nation.

Futures slid as much as 0.7 percent after declining the most in three weeks yesterday. Crude stockpiles climbed the most in five weeks, according to the American Petroleum Institute. Employment rose by 38,000 in May, the smallest gain since September, ADP Employer Services said. A 175,000 increase was forecast, according to a Bloomberg News survey. The Institute for Supply Management’s factory index dropped to 53.5.

“Oil futures fell sharply after the U.S. data printed weaker than expected, raising concerns over growth momentum in the U.S.,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, wrote in a note today.

Crude for July delivery lost as much as 67 cents to $99.62 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.82 at 9:20 a.m. Sydney time. The contract yesterday declined $2.41, or 2.4 percent, to $100.29, the biggest single-session drop since May 11. Prices are up 37 percent the past year.

Brent crude oil for July delivery fell $2.20, or 1.9 percent, to end the session at $114.53 a barrel on the London- based ICE Futures Europe exchange yesterday, the lowest settlement since May 24.
Crude Inventories

The European benchmark contract traded at a premium of $14.24 a barrel to U.S. futures yesterday. The difference between front-month contracts in London and New York reached a record $19.54 on Feb. 21. It averaged 76 cents last year.

The industry-funded American Petroleum Institute said U.S. crude supplies rose 3.5 million barrels last week to 371.6 million. An Energy Department report today is forecast to show stockpiles declined 1.6 million barrels, according to the median of 13 analyst estimates in a Bloomberg News survey.

The Institute for Supply Management’s factory index fell more than projected to the lowest level since September 2009, the Tempe, Arizona-based group said yesterday. Economists forecast the ISM gauge would drop to 57.1, according to a Bloomberg News survey.
Forecasts Lowered

The ADP employment report prompted some economists cut their forecasts for payrolls to be reported in two days by the Labor Department. Goldman Sachs Group Inc., Deutsche Bank Securities Inc. and Bank of America Merrill Lynch reduced their estimates. Economists at JPMorgan Chase & Co. in New York lowered second-quarter growth forecasts for the second time in as many weeks.

The world’s largest economy will expand at a 2 percent annual rate from April through June, down from a prior estimate of 2.5 percent, according to an e-mailed statement yesterday from Michael Feroli, the bank’s chief U.S. economist.

The most-active oil option was the July $95 put, a bet that prices will fall. The contract rose 30 cents to 89 cents. The most-traded call option, a bet that prices will rise, was the July $115 call, which fell 9 cents to 10 cents.

The Organization of Petroleum Exporting Countries’ crude output increased for a second straight month in May, led by gains from Saudi Arabia and Nigeria, according to a Bloomberg News survey.

Production rose 165,000 barrels, or 0.6 percent, to average 28.895 million barrels a day, according to the survey of oil companies, producers and analysts. Saudi Arabia bolstered output by 75,000 barrels, or 0.8 percent, to 8.925 million barrels a day, the highest level since October 2008. Nigerian production rose 75,000 barrels a day to 2.06 million last month.

To contact the reporter on this story: Ben Sharples in Melbourne