Oil Sinks On Weak China Data and As Heating Season Ends

Reuters

NEW YORK, March 10 (Reuters) - U.S. oil fell by more than $1 per barrel on Monday, pressured by an unexpected drop in China's exports that stoked fears of a slowdown in the world's second-largest economy.

Moderating temperatures that will reduce the need for heating fuels also weighed on U.S. oil prices. U.S. ultra low-sulfur diesel futures, more commonly known as heating oil, were down more than 1.5 percent.

Oil on both sides of the Atlantic was pressured as traders unwound some of the risk premium associated with fears of an escalation in tensions in Crimea over the weekend.

The crisis in Ukraine had pushed money managers to collect a record number of bullish bets in U.S. oil futures and options last week, U.S. government data showed on Friday.

Data from the IntercontinentalExchange showed the same managers raised their bullish Brent positions to their highest since October.

"There was selling pressure early on from Chinese economic data," and the lingering tensions in Russia are not providing clear support, said Dwayne Pliska, senior trading consultant with HighGround trading group in Chicago. "We're still looking for (U.S. oil to) possibly drop to the key technical and psychological level of $100."

After two straight days of gains, Brent crude was trading 1.09 cents lower at $107.91 by 1:40 p.m EDT (1740 GMT), having fallen $1.25 earlier in the session. U.S. oil fell $1.61 to $100.97 a barrel after touching a high of $102.82.

The spread between global benchmark Brent and U.S. oil widened near $7 by late morning, after earlier narrowing to $6 on expectations that data this week would show another draw from Cushing, Oklahoma, the benchmark delivery point for the U.S. oil futures contract.

U.S. oil's discount to the global benchmark has narrowed by nearly $9 since the beginning of the year as TransCanada's Gulf Coast pipeline has funnelled oil from Cushing to theGulf Coast.

With heating season coming to an end and refiners in maintenance season, traders and analysts expect that oil leaving Cushing will pool along the coast, forcing a temporary glut and capping prices until stocks are drawn down to make gasoline for summer driving season. Oil stocks in the Gulf Coast have risen every week over the last 1.5 months.

"We will continue to see draws out of Cushing, but I think we will see much larger builds on the Gulf Coast," said Tariq Zahir, managing member of commodity trading advisor Tyche Capital Advisors in New York.

U.S. oil refiners were expected to take slightly less capacity offline this week than last week, data from research company IIR showed.

Most global markets focused on weak data out of China that showed the No. 2 oil consumer's exports in February fell 18.1 percent from a year earlier, following a 10.6 percent jump in January. Many risk assets and stock markets fell on the weak data even as though it likely reflects a slowdown accruing to the Lunar New Year holidays. Copper prices hit an eight-month low.

Oil traders seemed to put tensions in Ukraine on the back burner, though Russia's continued push to take hold of the Crimean peninsula was expected to keep markets volatile.

Brent oil was alternately supported and pressured by the ongoing crisis in Libya that has cut into oil output. Libya's parliament has ordered that a special force be sent within one week to "liberate" all rebel-held ports in the volatile east, officials said on Monday, raising the stakes over a blockage that has cut off vital oil revenues.

At the same time, Libya's National Oil Company said production had restarted at the El Sharara field which feeds export terminals in the west and would reach capacity on Tuesday afternoon.

(Additional reporting by Lin Noueihed in London and Manash Goswami in Singapore; Editing by Marguerita Choy and Bernadette Baum)

 

Copyright 2014 Thomson Reuters.

 



Most Popular Articles