Oil falls a second day as China industrial output growth slows

Oil dropped as China’s industrial production trailed estimates and after Saudi Arabian crude output climbed from a 20-month low last month.

Futures in New York fell as much as 0.5% after Chinese government data showed the world’s second-biggest oil-consuming nation started the year with the weakest industrial growth since 2009. Saudi Arabia’s crude production increased, according to an official with knowledge of the country’s oil policy. Iran said the prospects for resolving a dispute over its nuclear program have improved.

“Disappointment about the Chinese economic news is putting some downward pressure on the oil market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “WTI can be expected to consolidate between $90 and $92. If the Saudi production gain is confirmed, we should see further downward pressure on the market.”

Crude oil for April delivery fell 67 cents, or 0.7%, to $91.28 a barrel at 9:28 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 23% below the 100-day average. Futures are down 0.8% this month.

Brent oil for April settlement dropped 55 cents, or 0.5%, to $110.30 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded today was 68% above the 100-day moving average. The European benchmark was at an $19.02 premium to WTI. The gap narrowed to $18.90 on March 8, the least since Jan. 31.

Chinese Economy

China’s industrial output expanded 9.9% in January and February, according to the government figures. That’s lower than a 10.6% median estimate in a Bloomberg survey. Retail sales also slowed in the period and new local-currency loans were down in February, separate data showed.

Saudi Arabia raised crude production in February to 9.15 million barrels a day, an increase of 100,000 barrels from the previous month, the Persian Gulf official said, asking not to be identified because the information is confidential. The kingdom reduced exports to 9.16 million barrels last month from 9.26 million, according to the official.

Iran saw signals that “the other side is acting in good faith” in talks about its uranium enrichment program, Foreign Minister Ali Akbar Salehi said yesterday in Tehran.

The Islamic republic met on Feb. 26 and Feb. 27 in Almaty, Kazakhstan, with China, Germany, France, Russia, the U.K. and the U.S. No deal was announced and the details of a proposal to Iran weren’t released. The two sides are scheduled to meet March 18 in Istanbul and from April 5 to April 6 in Almaty.

Goldman Sachs

U.S. crude could be supported in the second and third quarters by pipeline “de-bottlenecking” in North America from April to June, according to Goldman Sachs Group Inc.

The balance at Cushing, Oklahoma, the largest oil storage hub in the U.S., could “shift into a large deficit” in the second quarter as refineries end maintenance and new pipeline capacity from the Permian Basin diverts crude to the Gulf Coast, Jeffrey Currie, Goldman’s head of commodities research in New York, said in an e-mailed report today.

Hedge funds cut bullish oil bets to a two-month low in the week ended March 5. Money managers cut net-long positions, or wagers on rising prices, by 4.4% to the least since Jan. 1, the Commodity Futures Trading Commission’s March 8 Commitments of Traders report showed. Bullish bets have fallen 24% from an 11-month high in mid-February.

Bloomberg News

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