Crude oil falls from highest in 31 months; heads for eighth monthly gain

April 30, 2011 - 0:0

Oil declined from a 31-month high in New York, trimming an unprecedented eighth monthly gain as signs of a faltering global economic recovery stoked speculation that demand for crude will decline.

Futures slid as much as 0.5 percent after data showed South Korea’s industrial production and U.S. economic growth missed analysts’ forecasts. Reports on Friday may show U.S. spending cooled and businesses grew at a slower pace in the world’s biggest crude-consuming nation.
“There is fear that the slightly bearish U.S. first- quarter GDP is an indication of the recovery slowing down, with bearish implications on oil demand,” said Filip Petersson, commodity strategist at Stockholm-based SEB AB.
Crude for June delivery dropped as much as 61 cents to $112.25 a barrel in electronic trading on the New York Mercantile Exchange. It was at $112.71 at 10:50 a.m. London time. On Thursday, the contract climbed 10 cents to $112.86, the highest settlement since Sept. 22, 2008.
Brent for June settlement was at $125.08 a barrel, up 6 cents, after falling as much as 0.6 percent to $124.25 on London’s ICE Futures Europe exchange. The contract on Thursday slid 11 cents to $125.02. Trading was thin on Friday as the UK was closed for a public holiday to celebrate the wedding of Prince William and Kate Middleton.
Futures pared earlier losses as the euro advanced against the dollar following a report that showed European inflation accelerated to the fastest pace in 2 1/2 years, fanning speculation the European Central Bank may raise interest rates again. The euro was up 0.3 percent at $1.4867. A weaker dollar makes commodities priced in the U.S. currency more appealing.
---------------U.S. economy
U.S. futures are up 5.6 percent this month, headed for an eighth monthly increase, the longest sequence of gains on record, as the armed conflict in Libya threatens to prolong supply cuts from Africa’s third-largest producer.
The European benchmark traded at a premium of $12.37 a barrel to U.S. futures. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21. The spread averaged 76 cents last year.
The U.S. economy expanded at a 1.8 percent annual rate from January through March, less than the 2 percent projected by economists in a Bloomberg News survey. A report on Friday may show consumer spending climbed 0.5 percent in March, after a 0.7 percent gain in February, according to a separate survey. The Institute for Supply Management-Chicago Inc. may say its business barometer fell to 68.2 in April from 70.6 in March.
--------------Refining margins Rising crude prices have narrowed refiners’ profits from turning crude into fuels such as gasoline and diesel, according to Total SA, Europe’s third-largest oil producer.
Total’s European refining margin indicator, a measure of profit from turning crude into oil products, dropped to $24.60 a metric ton in the first quarter from $32.30 in the fourth quarter of 2010, the company said on Friday.
“European refining margins have decreased compared to the first quarter, reflecting mainly the impact of the sharp increase in oil price” since the start of the second quarter, Total said.
Asia’s oil consumption growth will slow to 4 percent in the second half of 2011 compared with 5 percent in the first six months of the year, JPMorgan analysts, led by New York-based Lawrence Eagles, said in a report dated on Thursday. Government efforts to shield buyers from gains in prices through subsidies won’t prevent the slowdown, the analysts said.
Crude oil may rise next week as the dollar declines after the Federal Reserve said the “moderate” economic recovery still requires record-low interest rates, a Bloomberg News survey showed.
Twenty-one of 35 analysts, or 60 percent, forecast oil will increase through May 6. Nine respondents, or 26 percent, predicted prices will decline and five projected little change. Last week, 38 percent of respondents said futures would gain.
(Source: Bloomberg)