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WTI Crude Nears Five-Week Low on China Concern as Brent Drops

March 13 (Bloomberg) -- West Texas Intermediate oil traded near a five-week low as China refined the least crude in four months and U.S. inventories surged.

Prices moved between gains and losses. Refinery processing in China fell 1 percent from a year earlier in the January- February period, the National Bureau of Statistics said today. U.S. crude stockpiles increased last week to the highest level since Dec. 13 as refiners reduced operations. WTI rose earlier on better-than-expected U.S. economic reports.

“If China consumes less crude, obviously it’s going to hit the oil market,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The economic news is good. Crude has a chance to come back above $100 when the U.S. utilization rate increases.”

WTI for April delivery slid 2 cents to $97.97 a barrel at 12:48 p.m. on the New York Mercantile Exchange after dropping to $97.67. The contract decreased 2 percent to $97.99 yesterday, the lowest close since Feb. 6. The volume of all futures traded was 29 percent above the 100-day average.

Brent for April settlement slipped 87 cents, or 0.8 percent, to $107.15 a barrel on the London-based ICE Futures Europe exchange. Volume was 4.7 percent below the $100-day average. The European crude traded at a premium of $9.18 to WTI. The spread ended at $10.03 yesterday, the widest close in six weeks.

Chinese Demand

Refinery crude use in China decreased to 78.78 million metric tons, the statistics bureau said in a statement on its website. That’s equivalent to 9.79 million barrels a day, the lowest rate since October. The bureau in Beijing combines data for the two months, citing distortions from the week-long Lunar New Year holiday, whose timing differs each year.

“Refinery demand is weak both in China and the U.S.,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s a big concern for the market.”

U.S. crude stockpiles rose 6.18 million barrels last week to 370 million barrels, according to the Energy Information Administration, the Energy Department’s statistical arm. Domestic production climbed 1.3 percent to 8.18 million barrels a day, the most since July 1988.

The refinery utilization rate slipped 1.4 percentage points to 86 percent of capacity, the least since October. Supplies at Cushing, Oklahoma, the delivery point for WTI futures, fell 1.34 million barrels to 30.8 million, a two-year low.

Test Sale

The Energy Department announced yesterday it would sell 5 million barrels of crude from the Strategic Petroleum Reserve in a test of the distribution system.

“I fully expect crude prices to rebound from the SPR release-induced faux decline,” said Paul Crovo, a Philadelphia- based oil analyst at PNC Capital Advisors.

The sale of less than 1 percent of the total stockpile was scheduled and isn’t tied to turmoil in Ukraine or other geopolitical events, the department said. Potential buyers have until tomorrow to submit bids. Delivery will start April 1 and end April 30.

Crude also followed losses in U.S. stocks. The Standard & Poor’s 500 Index fell as much as 0.9 percent. The dollar was little changed against the euro after falling as much as 0.5 percent earlier. A stronger dollar reduces oil’s investment appeal.

WTI rose earlier as jobless claims unexpectedly fell last week to the lowest level since the end of November and retail sales gained in February for the first time in three months.

Jobless claims dropped by 9,000 to 315,000 in the week ended March 8, a Labor Department report showed today. The median prediction of 53 economists surveyed by Bloomberg was 330,000. Retail sales advanced 0.3 percent last month, the Commerce Department said. The median forecast of 84 economists surveyed by Bloomberg was a 0.2 percent advance.

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