WTI fluctuates on supply data, set for worst week since June

West Texas Intermediate crude swung between gains and losses on Friday and is set for the biggest weekly decline in four months after U.S. crude oil inventories rose for a fifth consecutive week, while supplies at Cushing, Oklahoma, jumped for a second week. Continuing progress in talks between Iran an the U.S. further pressured the market but expectations for demand to recover in the U.S. and China provided support.

On the New York Mercantile Exchange, WTI crude for delivery in December traded at $97.13 per barrel at 6:59 GMT, up 0.02% on the day. Prices held in range between days high and low of $97.51 and $97.03 per barrel respectively. The American benchmark fell to a four-month low of $95.95 per barrel on Thursday and was down 3.7% on weekly basis on Friday.

Meanwhile on the ICE, Brent futures for settlement in December was unchanged at $106.99 per barrel at 7:00 GMT. Prices varied in a days range between $107.39 and $106.91 a barrel. The European benchmark lost 0.6% on Thursday and marked a 2.85% weekly loss.

Market sentiment remained dampened after the Energy Information Administration reported on Wednesday that U.S. crude oil inventories rose for a fifth straight week. The EIA said that U.S. crude reserves surged by 5.2 million barrels, exceeding the median estimate of analysts surveyed by Bloomberg for a 3 million increase. Total supplies now stood at 379.8 million barrels and were above the upper range for this time of the year. Refineries utilization fell to 85.9% from 86.2%, defying projections for an increase to 86.5%. U.S. crude oil imports fell by 348 000 barrels per day from a week earlier and averaged 7.7 million bpd.

The report also showed that gasoline production fell last week, while distillate fuel output increased, averaging 9.1 million and 4.8 million barrels per day, respectively. Total motor gasoline inventories fell by 1.8 million barrels and were near the top of the average range. Analysts expected a 1 million drop. Distillate fuel supplies rose by 1.5 million barrels, confounding projections for a 1.8 million drop, but remained near the lower limit of the average range for this time of the year.

Inventories at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, added 358 000 barrels to 33.3 million, a second consecutive increase.

U.S. manufacturing activity declines

Prices were also pressured after a preliminary report showed that manufacturing activity in the U.S. fell to a 12-month low and slowed down for the first time since September 2009. The decline was based on weak new orders growth, the slowest in six months, despite a rise in employment.

Chris Williamson, Chief Economist at Markit, commented: “The flash PMI provides the first insight into how business fared against the backdrop of the government shutdown in October, and suggests that the disruptions and uncertainty caused by the crisis hit companies hard. The survey showed the first fall in manufacturing output since the height of the global financial crisis back in September 2009. We can expect GDP growth to have suffered a setback in the fourth quarter, but it is too early to estimate the extent of the shutdown. The Fed will be equally unsure of the underlying health of the economy, and will no doubt want to see the economic data stabilise, which could take until the end of the year, before making any firm policy decisions.”

Manufacturing in the Euro zone also disappointed after data showed yesterday that Frances Advance Manufacturing PMI fell to 49.4 from 49.8 in October, confounding projections for an increase to 50.1. Germanys manufacturing activity managed to pick up and rose to 51.5 from 51.1, beating projections for a gain to 51.4. However, the Euro zones preliminary manufacturing Purchasing Managers Index rose to 51.3 in October from 51.1 in September, underperforming expectations for an increase to 51.4.

Iran talks

Also fanning negative sentiment, the White House will press for a further delay on a sanctions bill against Iran that was expected to be voted by the Senate Banking Committee last month. It was held back following appeals by President Barack Obamas administrations to let negotiations between Iran and Western major powers commence. The White House hosted a meeting of aides to Senate committee leaders on Thursday to persuade law makers to hold off a new package of sanctions against the Islamic republic.

Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp., said for CNBC: “The progress of talks may not yield an immediate agreement or a deal on the nuclear issue, but will put a moratorium on further sanctions against Iran. That may mean less oversight, and more Iranian oil leaking into the market.”

Fed stimulus

Oil prices however drew support on speculations that the Federal Reserve will refrain from trimming its monetary stimulus this year, which sent the U.S. dollar to multi-month lows. According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin decelerating its monetary stimulus in March.

The U.S. dollar index traded at 79.18 at 7:01 GMT, down 0.09% on the day. The December contract plunged to 79.07, the weakest since September 2012, and extended its weekly decline to over 0.6%. Weakening of the greenback makes dollar-denominated commodities cheaper for foreign currency holders and boosts their appeal as an alternative investment.

Oils losses were also capped after a preliminary private gauge of China’s manufacturing expansion exceeded analysts’ expectations, supporting demand prospects in the world’s second-biggest consumer. The HSBC Flash China Manufacturing Purchasing Managers’ Index surged to a seven-month high of 50.9 in October, up from September’s final estimate of 50.2. The expansion was largely based on strong new orders. The report also showed that China’s Manufacturing Output Index rose to a six-month high of 51.0 from 50.2 in September. This comes after data by the National Bureau of Statistics showed earlier in the month that the Asian economy expanded at a faster pace in the third quarter from the previous one.

However, market players will be keeping a close watch on Chinas economic news after speculations for a restrictive monetary policy spurred concern over demand for raw materials. Investors remained wary on speculations for monetary tightening after China’s money-market interest rates rose to the highest in three months on Wednesday. The People’s Bank of China refrained from injecting cash for a second day yesterday on concern that ample credit could fuel inflation after the National Bureau of Statistics reported that home prices in four major cities rose to the highest since January 2011, while consumer inflation gained at the fastest pace since February.