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WTI crude’s discount to Brent widest in 5 weeks

West Texas Intermediate crude declined, widening its discount against Brent to the most in five weeks on estimates that oil stockpiles increased last week in the United States, the world’s largest user of the commodity.

WTI futures dropped as much as 0.5 percent in New York after falling the most since Jan. 2 Tuesday.

U.S. crude stockpiles probably rose for the 13th time in 14 weeks, a Bloomberg News survey shows before government data Wednesday.

Prices also slipped on signs of a manufacturing slowdown in China, the second-biggest oil consumer. Brent was steady on concern that the clash over Ukraine between the West and Russia, the world’s largest crude producer, may intensify.

“Growth is slowing globally and we expect the market to soften over the summer,” Guy Wolf, global head of market analytics at Marex Spectron Group in London, said by email. China’s “economy is slowing as part of a deliberate tightening strategy,” he said.

WTI for June delivery declined as much as 55 cents to $101.20 a barrel in electronic trading on the New York Mercantile Exchange, and traded for $101.57 at 12:33 p.m. London time.

The May contract expired Tuesday after falling $2.24 to $102.13, the lowest close since April 7.

The volume of all futures traded was about 68 percent above the 100-day average for the time of day. Prices have climbed 3.2 percent this year.

Brent for June settlement rose 15 cents to $109.42 a barrel on the London-based ICE Futures Europe exchange.

The European benchmark crude’s premium to WTI expanded to as much as $8.19 a barrel on ICE, the widest since March 19.

Chinese economy

A preliminary China Purchasing Managers’ Index from HSBC Holdings Plc (NYSE: HSBC)and Markit Economics was at 48.3 for April, signaling a fourth month of contraction.

Wednesday’s figure matched the median projection of economists in a separate Bloomberg survey. Readings below 50 signal contraction.

WTI dropped 0.5 percent in the week ended April 4, the first decline in three weeks, after HSBC and Markit reported a final manufacturing index of 48 for March on April 1.

China will account for about 11 percent of global oil consumption this year, compared with 21 percent for the United States, estimates from the International Energy Agency in Paris show.

The Chinese PMI “has been below 50 since the beginning of the year, signaling contraction rather than growth in the Chinese manufacturing sector,” Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark, said in a report. “Tensions in Ukraine are still building.”

U.S. inventories

U.S. crude inventories probably expanded by 3 million barrels in the week ended April 18, according to the median estimate of 10 analysts surveyed before data from the Energy Information Administration, the Energy Department’s statistical arm. Supplies increased by 519,000 barrels, the American Petroleum Institute reported Tuesday.

The EIA data is expected to show that gasoline stockpiles shrank by 1.65 million barrels last week while distillates, including heating oil and diesel, decreased by 300,000 barrels, according to the survey.

The API in Washington reported Tuesday a 3.39 million- barrel drop in gasoline inventories and a 570,000 gain in distillates.

The industry group collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA.

“The market is nervous about China,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, who predicts investors may sell WTI contracts if prices advance to $104 a barrel. “The Russian situation remains a focal point.”

In Ukraine, acting President Oleksandr Turchynov called on security forces to move against separatists after the discovery of two bodies in the country’s eastern region, saying that “terrorists” backed by Russia had “crossed the line.”

He spoke hours after meeting in Kiev on Tuesday with U.S. Vice President Joe Biden, who pledged American support including $50 million in aid.

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