US crude hits record low

New York: West Texas Intermediate dropped to the lowest price this year and headed for a second weekly decline as Chinese manufacturing expanded less than forecast and crude production by the Organisation of Petroleum Exporting Countries (Opec) rose for the first time in six months.

WTI fell below $91 a barrel in New York for the first time since December 31. Opec raised output by 97,000 barrels to 30.7 million a day in February, a Bloomberg survey showed. China’s manufacturing purchasing managers index fell to 50.1 last month, compared with a median forecast of 50.5. Oil also fell as $85 billion of spending cuts were about to be triggered in the US

Brent crude fell to a six-week low near $111 a barrel, capping a month-end sell-off that has seen prices fall by almost $8 in two weeks as concerns have resurfaced about the global economy and the strength of demand.

Despite initially pushing higher early in the session, Brent eventually succumbed to another wave of selling, dropping below its 100-day moving average for the first time since January as traders digested lower-than-expected US gross domestic product figures.

While a stronger labour market reading in the United States propped up equity markets for much of the day before they ended flat and offered crude some support, Commerce Department numbers showed the US economy grew by just 0.1 per cent in the fourth quarter, dampening hopes the recovery is gaining traction.

“The oil market had been unsuccessfully trying to hold above this week’s lows, and the worries about the less-than-expected GDP number have entered the equation,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Brent crude for April delivery closed down 49 cents at $111.38 a barrel, having earlier touched a low of $110.87, the weakest level since Jan. 18. For the month, Brent lost 3.6 per cent in February.

The drop took Brent below 100-day moving average at $111.68, a key indicator of market sentiment closely watched by traders. Brent’s 200-day moving average is at $109.08.

US crude fell 71 cents to $92.05 a barrel, capping a drop in February after three straight monthly gains. It dropped as low as $91.57 on Thursday and lost 5.6 per cent over the month.

The March RBOB gasoline contract, which expired on Thursday, rose 2 per cent or nearly 6 cents to close at $2.9146 a gallon after dropping more than 12 cents on Wednesday on concerns about demand. The April contract, which is a winter-summer transitional grade, closed slightly higher at $3.1117.

A Reuters poll showed a majority of oil market analysts expect oil prices to fall slightly this year due to weak demand in many industrialized nations and improving global supply.

In the monthly survey of 27 analysts, the consensus forecast was for Brent crude to average $110.10 per barrel in 2013, down from an average of $111.70 last year. But the 2013 forecast was up slightly from last month’s $109.70.

Market watchers maintained longer-term worries about the US economy, particularly given the ongoing political deadlock over the budget and automatic spending cuts known as “sequestration.”

Without a deal from the White House and Congress, $85 billion will automatically be slashed from the budget from Friday, which President Barack Obama warned could shave at least 0.6 percentage point off economic growth.

- Reuters