Oil Drops After Stock Supplies Increase

West Texas Intermediate fell for the third time in four days before a government report forecast to show U.S. crude stockpiles expanded and amid concern consumption in China may falter.

Futures in New York dropped as much as 1.5 percent as prices approached a technical level that signals gains may have been excessive. U.S. crude inventories increased for a sixth week to 363.6 million barrels, according to a Bloomberg News survey of analysts before Energy Information Administration data tomorrow. Equities in China, the world’s second-largest oil user, plunged the most since July on speculation a weaker property market will crimp growth.

“Prices have rallied further than perhaps the underlying supply-demand fundamentals would suggest,” said Hakan Kocayusufpasaoglu, chief investment officer at Archbridge Capital AG, a Zug, Switzerland-based hedge fund. “Demand growth is not phenomenally strong, and emerging markets, which have been the main driver of growth, are slowing down.”

WTI for April delivery slid as much as $1.49 to $101.33 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.54 as of 1:27 p.m. London time. The contract rose 0.6 percent to $102.82 yesterday, the highest close since Feb. 20. The volume of all futures traded was about 52 percent above the 100-day average.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza