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WTI Crude Declines Sixth Day in Seven as Japan Economy Slows

August 12, 2013

(For Bloomberg fair value curves, see CFVL <GO>)

 

Aug. 12 (Bloomberg) -- West Texas Intermediate crude fell for the sixth time in seven days as Japan’s economy slowed in the second quarter and the dollar strengthened.

Prices fell as much as 0.8 percent as Japan’s gross domestic product rose an annualized 2.6 percent, down from 3.8 percent the prior quarter, the Cabinet Office said. The dollar gained versus the majority of its 10 most-traded peers, reducing crude’s investment appeal. Bijan Namdar Zanganeh pledged to raise Iran’s output if he becomes the country’s oil minister.

"We had weak GDP data out of Japan," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. "The strong dollar is probably where some of the pressure is coming from. We are back to the trading band between $103 and $108."

WTI for September delivery slid 76 cents, or 0.7 percent, to $105.21 a barrel at 9:14 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 20 percent below the 100-day average.

Brent for September settlement dropped 60 cents, or 0.6 percent, to $107.62 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.4 percent below the 100-day average. The European benchmark ’s premium to WTI was as little as $1.62, the narrowest on an intraday basis since Aug. 5.

 

Japan’s Economy

 

Second-quarter growth in Japan, the third-largest oil- consuming country after the U.S. and China, was slower than the 3.6 percent gain predicted by 32 economists in a Bloomberg survey. Consumer spending, which accounts for about 60 percent of the economy, contributed 1.9 percentage points to the annualized real growth rate.

The Bloomberg U.S. Dollar Index rose for the first time in seven days before a report tomorrow that may show a fourth straight monthly gain in retail sales, based on the median estimate of 64 economists. An increase might back the case for the Federal Reserve to reduce stimulus.

Fed Bank of Chicago President Charles Evans, who has been among the most vocal proponents of record monetary accommodation, said Aug. 6 that the central bank may begin curbing the $85 billion a month bond purchases in September.

 

Iranian Output

 

Zanganeh, a former Iranian oil minister nominated by President Hassan Rohani to take the post, said his "first action will be to bring the country’s oil production capacity back to 2005" levels, according to Shana, the Oil Ministry’s news website.

Iran, once the second-biggest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, has slipped to sixth place, producing 2.56 million barrels a day in July, according to a Bloomberg survey of producers and analysts. Its 2005 production averaged almost 4 million barrels a day.

Money managers reduced their bullish positions on WTI for a second week on speculation that the Fed will scale back stimulus. Hedge funds cut net-long positions, or wagers that prices will rise, by 2.5 percent to 310,827 futures and options combined in the seven days ended Aug. 6, the Commodity Futures Trading Commission said in its weekly report on Aug. 9.

 

--With assistance from Grant Smith in London. Editors: Bill Banker, Dan Stets

 

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

 

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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