WTI heading for a weekly drop

WTI crude traded lower at $93.50 a barrel on the Nymex in Asian trading, down 0.11% on the day. Prices settled up 0,5% on Thursday following surprising decline in U.S. gasoline stockpiles.

The Energy Information Administration’s report published on Thursday showed gasoline inventories fell to a seasonally adjusted rate of 1.514 million barrels, compared to an increase of 3.015 million barrels the preceding period. This caused oil futures to rebound. Nevertheless, crude oil inventories increased by 3 million barrels last week and reached 397,6 million barrels. Forecast was for a decline of 600 000 barrels to 393,8 million. Crude oil inventories stood at 394,6 million barrels the preceding week, when stockpiles declined by 350 000.

Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney said for Bloomberg: “It doesn’t make much sense why we’re at these levels.” He said inventories continue to rise, while OPEC is unlikely to scale down output and predicted investors will buy WTI contracts at $92.50.

Data confirms the concerns about a decreasing global demand trend. U.S. Q1 GDP growth was revised downwards to 2.4%, compared to 2.5% according forecasts, thus dampening speculation about an earlier-than-anticipated slowdown of Fed’s Quantitative Easing program. Initial jobless claims rose by 10 000 to 354 000, way above the forecast of a 4 000 decline to 340 000. Market players have largely been tracking the shifting expectations about Fed’s monetary easing program this year. Negative U.S. data, which has been piling recently suggests the stimulus won’t be coming to an end any soon.

Negative economic news from China also keeps pressuring oil prices. The IMF cut its economy growth forecast for China to 7.75%, down from 8%. The Organisation for Economic Co-operation and Development also trimmed its forecast to 7,8% from 8%. The Asian nation’s official Purchasing Managers’ Index (PMI) is due on Saturday, but the Advance Purchasing Managers’ Index last week showed a factory activity slowdown. This, coupled with Chinese leaders saying they will tolerate a slower, but more ecological friendly, expansion drove copper and iron ore demand down and increased concerns about a lower oil demand in the future.

Oil traders have also been taking into account news about the OPEC meeting in Vienna on Friday. Hot topics will be OPEC’s quota and increased shale oil output by the U.S. Most analysts predict the Organization of the Petroleum Exporting Countries will not change its production pace. Ali al-Naimi, oil minister for Saudi Arabia, said that current conditions are “the best environment for the market” and that “demand is great”.