WTI futures decline on weak US data, supply concerns check losses

West Texas Intermediate crude fell on Friday after an unexpected decline in US retail sales and an increase in the number of people filing for initial unemployment payments raised concerns over the recovery state of the worlds biggest economy. Losses however were capped by supply outages in Libya and Angola and as cold weather and storms across the eastern US boosted demand for distillate fuels. Better than expected inflation figures from China also offered some support.

On the New York Mercantile Exchange, WTI crude for delivery in March fell by 0.26% to $100.09 per barrel by 7:58 GMT, holding in a daily range between $100.02 and $100.47 a barrel. The US benchmark was mostly unchanged on Thursday and is up 0.2% on weekly basis, set for a fifth weekly advance, the longest winning streak in a year.

Meanwhile on the ICE, Brent futures for settlement in April slid by 0.21% to $108.29 per barrel. Prices shifted in a daily range between $108.23 and $108.67 a barrel. The European benchmark added 0.2% on Thursday and is down 1% on weekly basis.

The oil market was pressured after weak economic figures from the US raised concern over how well the worlds biggest economy fared. The Labor Department reported that the number of people who filed for initial unemployment benefits in the week ended February 8th rose to 339 000, defying analysts projections for a drop by 1 000 to 330 000 from the previous period.

A separate report by the Commerce Departments Census Bureau showed that retail sales in the United States surprisingly contracted by 0.4% in January, confounding economists forecasts for a 0.3% increase. Decembers reading received and upward revision to show a 0.2% growth, up from initially estimated at -0.1%.

The lackluster data fueled speculations among market analysts whether the US economy is recovering so well as previously expected, spurring bearish sentiment towards oil demand prospects in the worlds top consumer.

The American benchmark however should remain supported in the short-term as persisting cold weather across the eastern US continued to stoke heating demand for distillate fuels. The last in a series of winter storms closed off government offices and public schools in Washington. Pennsylvania and New England may see snow of about 51 centimeters (20 inches), according to AccuWeather.com.

On Wednesday, the EIA reported a fifth consecutive decline in US distillate fuel inventories, albeit smaller than projected, while supplies at Cushing dropped for a second week. Distillate supplies, which include diesel and heating oil, fell by 0.73 million barrels to 113.1 million in the seven days through February 7th, trailing the median estimate of 10 analysts surveyed by Bloomberg for a 2.13-million drop.

US crude inventories rose by 3.27 million barrels last week to 361.4 million, compared to expectations for a 2.6-million increase. However, supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, plunged to 37.6 million barrels from 40.3 million a week earlier.

Global demand

This comes after the Energy Information Administration raised its global demand growth forecast earlier in the week, while also trimming its projections for US crude output in the next two years. The government agency cut its domestic crude production forecast for 2014 by 100 000 barrels per day to 8.4 million and by another 100 000 bpd to 9.2 million in 2015.

Meanwhile, the EIA revised up its forecast for world demand growth by 50 000 bpd to 1.26 million bpd in 2014, reflecting the global economy’s recovery state.

EIA’s upward revision was backed by OPEC as the group also predicted a larger demand growth this year compared to its previous estimate. The Organization of the Petroleum Exporting Countries said in its monthly report that global demand will rise by 1.09 million barrels per day in 2014, 40 000 bpd above its previous estimate and sighted a possibility for further improvements.

The group expects contraction in European demand to ease in 2014, while preliminary data from the last two months signaled strong consumption levels in the US.

On Thursday, the International Energy Agency released data showing that oil inventories in the developed nations fell by 1.5 million bpd in the fourth quarter of 2013, the sharpest decline in 15 years.

China economy

Also offering the oil complex some support, Chinas National Bureau of Statistics reported that consumer inflation in the worlds second biggest economy rose by 2.5% in January from a year earlier and matched Decembers reading, beating expectations to drop to 2.3%. Month-on-month, consumer prices gained 1.0%, outstripping projections for an acceleration toward 0.7% from 0.3% a month earlier. Producer inflation contracted by 1.6% from -1.4% in December, slightly better than anticipations for a 1.7% decrease.

The benign inflation numbers came after Chinas customs agency reported earlier in the week that the Asian nation’s exports surged by 10.6% in January, beating expectations for a minor 2.0% increase from December’s 4.3% growth. Meanwhile, imports soared 10.0% last month, defying expectations for a drop to an expansion of 3% after scoring 8.3% in December. As a result, China’s trade surplus jumped to $31.86 billion, outperforming forecasts to narrow to $23.65 billion from December’s $25.60 billion. Crude imports rose to a record 6.63 million barrels per day, up 11.9% from a year earlier, amid the opening of two refineries and a petroleum reserve cite.

Supply outages

Also helping limit losses, output at Libyas El Sharara oilfield fell to 200 000 bpd from 340 000 bpd after protesters shut a pipeline carrying oil to the western Zawiya terminal. As a result, nationwide output slid to 460 000 barrels per day on Thursday, down from nearly 600 000 bpd earlier in the week.

Additional supply concerns were raised after BP declared force majeure on exports of Plutonio crude from Angola yesterday. People familiar with the case said for CNBC that the field will undergo a maintenance in March, keeping a capacity of 180 000 barrels per day.