Oil trades below US$45 as signs of China, US demand awaited

[BEIJING] Oil traded below US$45 as investors await data that may signal the strength of demand in the world's two biggest consumers.

Futures in New York were little changed after falling 2.8 per cent Monday as China reported industrial-company profits declined 8.8 per cent in August. Measures of its factory output as well as US non- farm payrolls data are due this week. While US crude stockpiles are forecast to drop for a third week, oil trader Vitol Group expects inventories will continue to build or remain at current levels in coming months.

Crude's rally is faltering amid speculation a global glut will be prolonged as China's economy slows and US stockpiles remain almost 100 million barrels above their five-year average for this time of year. The commodities rout has forced Royal Dutch Shell Plc to abandon its US$7 billion search for oil in Alaska and Glencore Plc Tuesday slumped by the most ever in Hong Kong trading as analysts questioned the company's prospects in the face of falling prices.

"China's demand story is a big part of the pricing in oil," Michael McCarthy, a chief market strategist at CMC Markets in Sydney, said by phone. "What's much more important will be the PMI data" as the latest indicator of China's demand strength, he said.

China Data WTI for November delivery was at US$44.53 a barrel, up 10 cents, on the New York Mercantile Exchange at 10:17 am Singapore time. Prices fell US$1.27 to US$44.43 on Monday, the lowest settlement since Sept 14. The volume of all futures traded was about 65 per cent below the 100-day average.

Brent for November settlement was at US$47.40 a barrel, up 6 cents, on the London-based ICE Futures Europe. Prices have fallen 12 per cent this month. The European benchmark crude traded at a premium of US$2.88 to WTI.

China's official Purchasing Managers' Index for September will show a reading of 49.7, a second month below the 50 level that indicates contraction, according to the median estimate in a Bloomberg survey before the figure is released Thursday. The country's industrial profits last month tumbled the most since the government began releasing the monthly information in October 2011.

US crude inventories are expected to remain "full" on reasons that include the lack of ability to export and growing US output, Tom Ramsey, head of North American crude oil marketing and midstream for Vitol said. Output from the Permian Basin in the US will increase by about 5 to 8 per cent next year, according to Ramsey.

Stockpiles in the world's biggest oil consumer probably shrank by 500,000 barrels in the week through Sept. 25, a Bloomberg survey showed before government data on Wednesday.

Glencore, a global commodities powerhouse, plunged in Hong Kong following a collapse in its London shares as the company is roiled by sliding commodities prices. Shell said Monday it had abandoned exploration off Alaska for the "foreseeable future" after it failed to find meaningful quantities of oil or natural gas.

The Bloomberg Commodity Index, a measure of returns for 22 raw materials, has tumbled about 15 per cent since June 30, heading for the worst quarter since the end of 2008.

BLOOMBERG