Oil falls from two-week high as Chinese manufacturing contracts
SEOUL, South Korea (Bloomberg) -- Crude declined from its highest closing level in two weeks as a measure of manufacturing activity signaled contraction for a third straight month in China, the world’s second-biggest oil consumer.
Futures lost 1.6% in New York. China’s official purchasing managers index remained at 49.8 in October, the National Bureau of Statistics said Sunday, compared with an estimate of 50, the line between expansion and contraction. Russian oil production broke a post-Soviet record in October for the fourth time this year, while Iran said it will tell OPEC next month of its plans to raise output by 500,000 bpd.
Oil failed to sustain a rally above $50/bbl in October amid signs of a prolonged global glut as rising U.S. stockpiles keep supplies more than 100 MMbbl above the five-year seasonal average. The Organization of Petroleum Exporting Countries continues to pump crude at a faster pace than the limit the group has set for itself, with production near the highest level since 2008.
“This slower growth is more consistent with the slowing economic activity and overall energy demand,” Kevin Norrish, managing director for commodities research at Barclays Plc, said of China’s performance in a report. “Fundamentals suggest moderate demand growth ahead.”
Russia Advances
West Texas Intermediate for December delivery lost as much as 91 cents, or 2%, to $45.68/bbl on the New York Mercantile Exchange and was at $45.82 at 12:17 p.m. London time. The contract gained 53 cents to $46.59 on Friday, the highest close since Oct. 16. The volume of all futures traded was 10% below the 100-day average. Prices have decreased 14% this year.
Brent for December settlement dropped 80 cents to $48.76/bbl on the London-based ICE Futures Europe exchange. Prices rose 3.3% last week. The European benchmark crude traded at a premium of $2.91 to WTI.
Russia’s production of crude and gas condensate, which is similar to a light oil, averaged 10.78 MMbpd during the month, according to data from the Energy Ministry’s CDU-TEK unit. That’s an increase of 1.3% from a year earlier and 0.3% more than the previous month.
Iran Output
Iran will officially inform other OPEC members of its intention to raise crude production at the group’s Dec. 4 meeting, Oil Minister Bijan Namdar Zanganeh said in an interview with the Mehr news agency.
Iran’s plans to boost output by 500,000 bpd won’t cause crude prices to decline because the market already accounts for the additional barrels, Mehr reported citing Zanganeh. The Middle Eastern nation expects to raise output by 1 MMbpd by the end of Iranian year in late March.
Money managers’ short position in WTI crude jumped 24% in the week ended Oct. 27, according to data from the Commodity Futures Trading Commission. Net-long positions declined 15%, the most since July.
