Oil’s biggest three-day rally in 25 years stalled before U.S. government data forecast to show crude stockpiles expanded in the world’s largest oil consumer.
Futures dropped as much as 4 percent in New York after surging 27 percent in the three days through Monday, the most since August 1990. Inventories probably rose by 700,000 barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. A drop in a Chinese factory gauge to the lowest in three years prompted speculation the economy in the world’s second-biggest oil user is slowing.
Crude advanced in August to post the first monthly gain since May as concerns eased over a slowdown in the U.S. and amid signs the global glut may diminish. The Organization of Petroleum Exporting Countries won’t agree to carry the burden of propping up prices by cutting supply and non-member nations would have to contribute, according to the bulletin.
“Ultimately, we’re going to need to see actual evidence of production cuts,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “We’re a very long way from OPEC actually agreeing with anybody. An agreement like that would seem very problematic given that they find it hard to adhere to their own quotas, let alone those of third parties.”
West Texas Intermediate for October delivery dropped as much as $1.97 to $47.23 a barrel on the New York Mercantile Exchange and was at $47.70 at 1:21 p.m. Singapore time. The contract gained $3.98 to $49.20 on Monday. The volume of all futures traded was more than five times above the 100-day average. Prices climbed 4.4 percent in August.
U.S. Supplies
Brent for October settlement decreased as much as $1.99, or 3.7 percent, to $52.16 a barrel on the London-based ICE Futures Europe exchange. It gained $4.10 to $54.15 on Monday. The European benchmark crude traded at a premium of $4.95 to WTI.
U.S. crude stockpiles probably expanded to 451.5 million barrels through Aug. 28, according to the median estimate of seven analysts surveyed by Bloomberg before the EIA report. That would keep inventories more than 90 million barrels above the five year seasonal average.
China’s official Purchasing Managers’ Index was 49.7 for August, matching the median estimate in a Bloomberg survey and down from 50 in July. Numbers below 50 indicate contraction, with small, medium and large enterprises all below that level last month.
OPEC, the supplier of about 40 percent of the world’s crude, said it’s ready to talk to other global producers to achieve “fair and reasonable prices,” according to its bulletin published Monday. The group said will protect its own interests and there is “no quick fix” to market instability.
The Chicago Board Options Exchange Crude Oil Volatility Index closed at 54.37 Monday, the highest since March 17. The gauge of hedging costs on the U.S. Oil Fund, the biggest exchange-traded fund tracking WTI, advanced 40 percent in August, the most since October.
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