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WTI Crude Drops a Second Day on U.S. Inventories; Brent Declines

April 1 (Bloomberg) -- West Texas Intermediate fell on speculation that U.S. inventories increased for an 11th week, and as a gauge of U.S. manufacturing rose less than expected. Brent slipped.

WTI dropped as much as 1 percent. Stockpiles may have climbed 2.5 million barrels last week, according to a Bloomberg survey before a government report scheduled for release tomorrow. The Institute for Supply Management’s index reached 53.7 in March, lower than the 54 forecast in a Bloomberg survey. A separate report showed weakness in Chinese manufacturing.

“All the news is bearish today,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The manufacturing data is not supportive and we are expecting another build in inventories.”

WTI for May delivery declined 87 cents, or 0.9 percent, to $100.71 a barrel at 10:12 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 18 percent below the 100-day average. Prices dropped 1 percent in March.

Brent crude for May settlement slid 60 cents, or 0.6 percent, to $107.16 a barrel on the London-based ICE Futures Europe exchange. Volume was 25 percent below the 100-day average. The European benchmark was at a $6.45 premium to WTI after closing at $6.18 yesterday.

Supply Report

U.S. crude inventories rose 0.7 percent to 385 million barrels in the week ended March 28, according to the median of nine analyst estimates in a Bloomberg survey before the report tomorrow from the Energy Information Administration.

Stockpiles climbed 6.62 million barrels to 382.5 million in the week ended March 21, the highest level since November, the EIA, the Energy Department’s statistical arm, said last week. Inventories along the Gulf of Mexico, known as PADD 3, rose to 200.3 million, the most in EIA data going back to 1990.

“We have a well-supplied market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The Chinese manufacturing data is weak and is dragging down the market.”

The ISM manufacturing index rose from February’s 53.2, the Tempe, Arizona-based group reported. China’s Purchasing Managers’ Index decreased to 48 in March, the lowest reading since July, HSBC Holdings Plc and Markit Economics said today. Readings below 50 signal contraction.

“The Chinese PMI data is the primary factor weighing on the oil market,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re in wait-and-see mode after a couple weeks of rallying.”

WTI gained last week on speculation that the Ukraine crisis would disrupt global oil supplies.

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