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Oil Trims Quarterly Advance on U.S. Supply Speculation

27 Mar 2012

Oil fell from the highest close in three days in New York on speculation that rising supplies in the U.S. and signs of slowing economic growth in China signal demand may falter in the world’s two largest oil consumers.

Futures slid as much as 0.3 percent after gaining for a second day yesterday. U.S. crude stockpiles probably rose to a six-month high last week, a Bloomberg News survey showed. Profits at Chinese industrial companies fell in the first two months of the year for the first time since 2009, while Federal Reserve Chairman Ben S. Bernanke said “conditions remain far from normal” for the U.S. economy.

“Markets may be focusing more on the bearish side of Bernanke’s comments, that growth may not be that strong,” said Jeremy Friesen, a commodity strategist at Societe Generale SA inHong Kong. The drop in industrial profits in China, “also supports a view that growth is weak,” he said.

Oil for May delivery slid as much as 36 cents to $106.67 a barrel in electronic trading on the New York Mercantile Exchangeand was at $106.83 at 3:26 pm. Singapore time. It gained 16 cents yesterday to $107.03, the highest close since March 21. Prices are 8.1 percent higher this year and headed for a second quarterly gain.

Brent for May settlement was at $125.46, down 19 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $18.63. It closed at $18.62 yesterday.

Technical Support

Oil in New York has technical support at $103.39 a barrel, according to data compiled by Bloomberg. That’s a horizontal resistance line going back to May 31 last year, which was surpassed on Feb. 17. It also coincides with a Fibonacci retracement level on the weekly chart. Buy orders tend to be clustered near chart-support levels.

U.S. crude inventories increased 2.8 million barrels, or 0.8 percent, to 349.1 million in the seven days ending March 23, according to the median of six analyst estimates in the Bloomberg News survey before tomorrow’s Energy Department report. That would be the fifth gain in six weeks. Stocks increased after weather-related delays along the Gulf of Mexicosubsided.

Gasoline stockpiles probably fell 1.7 million barrels and distillate supplies, a category that includes heating oil and diesel, slid 250,000 barrels, the survey shows.

The American Petroleum Institute will release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Seaway Expansion

Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) will more than double the capacity of the Seaway Pipeline from Cushing, Oklahoma to the U.S. Gulf Coast to 850,000 barrels a day by mid-2014, the companies said in a statement today. The companies are reversing the pipeline to alleviate a glut of oil in the Midwest. Calgary-based Enbridge also said it will expand its Flanagan South project that takes oil from Illinois to the Gulf Coast.

Bernanke cited “high” levels of long-term unemployment and wages and hours worked that are below pre-crisis peaks in his speech in Arlington, Virginia. Oil rose yesterday after he also said that “continued accommodative monetary policy” can stimulate the economy.

The New York-based Conference Board’s consumer confidencegauge, due today, probably fell to 70.1 this month from a one-year high of 70.8 in February, according to the median of analyst estimates in a Bloomberg survey.

Chinese industrial companies had their first January-February profit decline in three years amid slowing exports and a government campaign to cool property prices. Net income dropped 5.2 percent from a year earlier to 606 billion yuan ($96 billion), the National Bureau of Statistics said on its website today.