Crude Trades Near Two-Day Low on U.S. Demand Outlook; Price Forecasts Cut

Oil traded near a two-day low in New York as investors looked beyond a report showing a weekly decline in U.S. stockpiles and bet that faltering economic growth in the U.S. will temper demand for crude.

Futures fluctuated before a speech tomorrow by Federal Reserve Chairman Ben S. Bernanke, who is scheduled to outline what steps the central bank will take to stimulate the world’s largest economy. Standard Chartered Plc lowered its third- quarter oil price forecasts before a report that may show U.S. growth slowed in the second quarter. Crude supplies unexpectedly fell last week, U.S. government data showed yesterday.

“Everyone’s sitting back and waiting to see what Bernanke has to say,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts crude will average $100 a barrel this year. “A 2 million drop in crude stockpiles is neither here nor there.”

Crude for October delivery was at $85.12 a barrel, down 4 cents, in electronic trading on the New York Mercantile Exchange at 11:36 a.m. Singapore time. Yesterday, the contract dropped 28 cents to $85.16, the lowest since Aug. 22. Prices are 17 percent higher the past year.

Brent oil for October settlement was at $110.17 a barrel, up 2 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $25.06 to U.S. futures, down from a record $26.21 on Aug. 19.

Crude Stockpiles

U.S. crude inventories dropped 2.2 million barrels to 351.8 million last week, the Energy Department report showed. Supplies were forecast to increase 1.75 million barrels, according to the Bloomberg News survey.

Gasoline inventories climbed 1.36 million barrels to 211.4 million, as imports increased and refineries raised output, according to the report.

Standard Chartered lowered its third-quarter price forecasts for New York and London-traded crude on “weaker-than- expected” demand in the U.S. and speculation output disruptions in the North Sea and West Africa will end.

The bank cut its Brent forecast to $112 a barrel from $115, Helen Henton, a London-based analyst at the bank, said in a report dated yesterday. New York’s West Texas Intermediate futures may average $90, compared with an earlier estimate of $98, according to the report.


U.S. Growth
Commerce Department data tomorrow will show U.S. gross domestic product grew at a 1.1 percent annual pace in the second quarter, down from the 1.3 percent that the government estimated last month, according a Bloomberg News survey of economists. Bernanke will give a speech to central bankers tomorrow at a meeting in Jackson Hole, Wyoming.

Hurricane Irene remained a Category 3 storm in the Atlantic and is forecast to approach North Carolina this weekend. It packed maximum winds of 120 miles (193 kilometers) per hour and may be upgraded today to Category 4, the second-strongest on the five-step Saffir-Simpson scale, the U.S. National Hurricane Center said in an advisory at 11 p.m. Miami time yesterday.

The U.S. East Coast, known as the Padd 1 region, has 10 operating refineries with a capacity of 1.21 million barrels a day, based on Energy Department data. The area accounts for 7.1 percent of total U.S. operating capacity.(Bloomberg)