Jan. 27 (Bloomberg) -- West Texas Intermediate crude fell for a second day as purchases of new homes in the U.S. came in below forecasts in December, raising concern that fuel demand in world’s biggest-consuming country may slow.
Prices dropped as much as 1 percent as U.S. equities erased gains. Home sales decreased 7 percent to a 414,000 annualized pace, the Commerce Department reported, lower than any estimate of economists surveyed by Bloomberg. WTI also declined on speculation the Federal Reserve will further curb stimulus at a meeting this week.
“The U.S. economy is stagnant and I am not terribly optimistic about it,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “There is some concern that without the Fed stimulus, stocks and oil will move lower.”
WTI for March delivery slid 72 cents, or 0.7 percent, to $95.92 a barrel at 10:53 a.m. on the New York Mercantile Exchange. Volume was 15 percent below the 100-day average. Prices climbed 2.4 percent last week.
Brent for March settlement declined 76 cents, or 0.7 percent, to $107.12 a barrel on the ICE Futures Europe exchange. The volume of all contracts traded was 17 percent below than the 100-day average. The spread between WTI and Brent on the ICE exchange narrowed to $11.20 a barrel from Jan. 24’s $11.24.
The median forecast of analysts surveyed by Bloomberg for December home sales was 455,000. November sales were revised to 445,000 from 464,000.
The Fed said Dec. 18 that it’s paring monthly purchases to $75 billion a month from $85 billion. Policy makers will gather tomorrow and Jan. 29 to consider the next step in their strategy of gradually reducing the pace of the bond buying.
Crude rose earlier on speculation that cold weather in the U.S. will boost demand for heating oil. The U.S. will get another blast of arctic air this week, according to the National Weather Service. Ultra low sulfur diesel, a proxy for heating oil, rose to the highest level since Aug. 30.
“Demand is going to be relatively strong because of the cold blast,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s helping WTI.”
January is on track to be the coldest month of the century in the lower 48 states, according to Commodity Weather Group LLC, after waves of freezing air swept across the country.