New York - Oil fell, paring its biggest weekly advance since April in New York, as signs of a strengthening US economy vied with concerns that Chinese demand will slow.
Futures declined on Friday after a 10 percent rally yesterday that was the biggest in more than six years. US gross domestic product increased at a 3.7 percent annualised rate in the second quarter, exceeding all projections in a Bloomberg survey of economists. The Chicago Board Options Exchange Crude Oil Volatility Index closed at 49.03 on Thursday, near the highest since April.
Oil is still poised for its first weekly gain in nine weeks, sustaining a rebound above $40 a barrel. Prices fell Monday to the lowest close since February 2009 after a slump in Chinese stocks sent ripples around global financial markets, and are still down more than 20 percent this year on concern a supply glut will persist.
“We have experienced highly volatile and nervous trading conditions this week,” Myrto Sokou, a senior research analyst at Sucden Financial in London, said by e-mail. That volatility will persist in the coming weeks as concerns about China linger, according to Sokou.
West Texas Intermediate for October delivery fell as much as 78 cents to $41.78 a barrel on the New York Mercantile Exchange and was at $42.08 at 9:56 am London time. The contract surged $3.96 to $42.56 on Thursday. The volume of all futures traded was more than double the 100-day average. Prices have climbed 4.1 percent this week.
US economy
Brent for October settlement lost as much as 95 cents, or 2 percent, to $46.61 a barrel on the London-based ICE Futures Europe exchange. It’s up 3.8 percent this week, also the most since April. The European benchmark crude traded at a premium of $4.92 to WTI, compared with $5.01 on Aug. 21.
The US GDP growth figure exceeded the median estimate of 3.2 percent in the Bloomberg survey, led by increases in consumer and business spending. It was higher than the 2.3 percent expansion the Commerce Department reported last month.
Crude inventories in the country, the world’s largest oil consumer, fell by 5.45 million barrels to 450.8 million through Aug. 21, data from the Energy Information Administration showed Wednesday. Stockpiles remain about 90 million barrels above the five-year seasonal average.
Oil must trade lower than $30 a barrel before producers will begin to curb production, according to Ed Morse, the head of global commodity research at Citigroup Inc. WTI will probably decrease below that level later this year and then recover, he said at a conference in New York on Thursday.
Analysts and traders were split on the direction of WTI futures, according to a separate Bloomberg survey through Thursday. Of the 48 respondents, 17 were bullish, 17 were bearish and 14 were neutral.
BLOOMBERG