Oil Slips as Service Slowdown Adds to Warning Signs on Economy
Crude has rallied about 20 percent this year.
(Bloomberg) -- Oil sank for a second straight day as service-sector orders fed worries about the economy and traders received another report of booming U.S. crude supplies.
Futures in New York fell 1.7 percent on Tuesday, after a volatile session that bounced between gains and losses. A gauge of demand for American service industries hit a one-year low in January, following data on Monday that showed an unexpected drop in factory activity. Prices maintained the decline after an oil-industry report was said to show crude stockpiles growing for the third consecutive week.
That countered word that Russia curbed output by 47,000 barrels a day last month from October levels, as it seeks to implement cuts pledged by top exporters to boost the market. Saudi Arabia was said to nudge up prices for its heavier grades as well. The uncertain outcome of the leadership struggle in oil-rich Venezuela also hung over the market.
“People are slowly getting nervous about the economy," said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts. “Everyone is worried that prices will be weaker than last year."
Crude has rallied about 20 percent this year as the Organization of Petroleum Exporting Countries, Russia and other partners cut volumes by the most in two years. Rig data signaled U.S. shale drilling is slowing down despite record output from the nation. Still, concerns about the global economy and thus oil demand have lingered.
West Texas Intermediate crude for March delivery settled at $53.66 a barrel on the New York Mercantile Exchange, down 90 cents.
Brent for April settlement slipped 53 cents to $61.98 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $7.98 premium to WTI for the same month.
Russian Energy Minister Alexander Novak said Russia is “fully complying with obligations" and will gradually cut output by May. That would put it behind an earlier promise to reach its pledged reduction in the first quarter. Saudi Arabia said last month that Russia’s curbs were moving slower than hoped for, although the kingdom said it expected compliance eventually.
In the U.S., crude inventories grew by 2.51 million barrels last week, according to people familiar with American Petroleum Institute data released on Tuesday. Official statistics are due Wednesday from the Energy Information Administration. A Bloomberg survey of analysts predicted a smaller 1.85 million barrel increase.
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--With assistance from Michelle Kim, Tsuyoshi Inajima and Alex Longley.
To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Mike Jeffers, Reg Gale
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