WTI futures drop a third day ahead of US inventories data, Libya supply hopes

West Texas Intermediate crude fell for a third day ahead of government data that is expected to show an eleventh consecutive weekly build up in US crude oil inventories. An unanticipated decline in supplies according to a private report limited losses. The oil complex, and particularly Brent crude, was heavily pressured amid the possible reopening of eastern Libyan export terminals. Market players eyed upcoming US supply data, as well as factory orders, non-manufacturing PMI and non-farm payrolls.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $99.64 per barrel at 7:00 GMT, down 0.10% on the day. Prices shifted in a daily range between $99.83 and $99.37 per barrel. The contract fell by 1.8% on Tuesday, the most since March 5th, and settled at $99.74 per barrel, the lowest since March 26th.

Meanwhile on the ICE, Brent futures for settlement in the same month stood at $105.66 per barrel, up 0.04% on the day, having varied between days high and low of $105.75 and $105.25 a barrel. The European crude benchmark lost 2% on Tuesday and settled at $105.62 a barrel, the lowest close since November 11th. Brent traded at a premium of $6.02 to its US counterpart from Tuesdays close at $5.88.

US crude remained under pressure amid expectations that the Energy Information Administration will report an 11th consecutive weekly gain in US crude oil inventories. According to a Bloomberg survey of seven analysts ahead of the government report, US crude supplies likely jumped by 2.5 million barrels to 385 million, the highest level since November, on the back of higher imports. Refinery utilization probably rose by 0.4% to 86.4% last week.

Motor gasoline inventories are projected to have fallen by 2 million barrels, while distillate fuel supplies, which include diesel and heating oil, likely declined by 300 000 barrels.

A separate private report by the industry-funded American Petroleum Institute showed late on Tuesday that US crude stockpiles unexpectedly fell by 5.8 million barrels last week. Distillate fuel inventories declined by 17 000 barrels, while motor gasoline stocks rose by 18 000 barrels, defying analysts expectations for a drop. Stockpiles at Cushing, Oklahoma, fell by 1.5 million barrels, a ninth consecutive weekly drop, the report showed.

API’s data however is deemed less popular than EIA’s numbers as they are based on voluntary information from operators of pipelines, refineries and bulk terminals, while the government requires reports to be filed with the EIA. However, if the government agency confirms the trade associations figures, we might see US crude jumping back above the $100 mark.

US, China data

The oil market remained under pressure after a report showing manufacturing activity in the US grew slower than expected in March, coupled with weak numbers from China.

The Institute for Supply Managements US manufacturing index registered at 53.7 in March, trailing analysts expectations for a jump to 54.0 from Februarys reading of 53.2.

In China, government data showed on Tuesday that manufacturing activity matched projections and inched up to 50.3 in March, up from 50.2 in February. However, the minor expansion did not do much to brighten the economy’s growth prospects after a recent pile of downbeat data points.

Meanwhile, a separate private report based on a smaller sample size showed that factory activity in China contracted for a third month. The HSBC China Manufacturing PMI fell to 48.0, compared to analysts’ expectations for a drop to 48.1 from February’s reading of 48.5.

The report showed that business conditions in China’s manufacturing sector worsened for a third straight month in March and market the worst performance since July. The contraction was attributed to a drop in new orders, although new business from abroad expanded for the first time in four months. Companies cut their headcount and purchasing activity and both input and output prices slid by the most since August 2012.

Market players are now awaiting the release of government crude inventories data in the US, as well as factory orders. Due later in the week are weekly initial jobless claims, US trade balance, services activity data and the all-important non-farm payrolls and unemployment rate figures. The ECB will hold a policy meeting on Thursday.

Libya hope

The oil markets were heavily pressured on Tuesday after the announcement a rebel group has reached an agreement with the Libyan government to reopen vital eastern oil export terminals, spurring hopes for an end to the standoff, which has crippled the nations oil output, its main source of revenue. A senior rebel leader told Reuters that the reopening could come through within days.

Ken Hasegawa, a commodity sales manager at Newedge Japan, said for CNBC: “The market needed to correct after strong gains since mid-March. Its possible that Libyan exports triggered a sell-off.”

Nationwide Libyan output has struggled to remain at a stable level since last summer when rebel groups which previously had helped oust Muammar Gaddafi, seized control over the nations biggest export terminals and oilfields, demanding autonomy and a greater share of the countrys oil revenue. The state-run National Oil Corporation said last week that nationwide output had fallen to around 170 000 barrels per day following renewed protests.