Oil price resumes slump, 'will struggle to get past $36'

Oil slumped as China’s factory gauge signalled conditions deteriorated for a sixth month and data showed that Kuwait and Nigeria helped boost crude production from Opec, exacerbating a global glut.

Futures lost as much as 2.1 per cent in New York to snap a four-day advance, the longest run of gains this year. The official January purchasing managers index for manufacturing in China, the world’s second-biggest oil user, dropped to a three- year low of 49.4, the National Bureau of Statistics said Monday. Output from Opec climbed to 33.11 million barrels a day last month as Indonesia’s membership to the group was reactivated, according to data compiled by Bloomberg.

Oil slid 9.2 per cent in January as volatility in global markets added to concern over brimming US stockpiles and the outlook for increased exports from Iran after international sanctions were removed. Chevron on Friday posted its first quarterly loss since 2002, which may presage a wave of writedowns as the other super-majors begin announcing results this week. Exxon Mobil and BP are scheduled to report on Tuesday.

“Unless we begin to see some tangible news emerge on production cuts, we’re getting toward the limits of this rally,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Oil will struggle to get past $36.”

West Texas Intermediate for March delivery dropped as much as 72 cents to $32.90 a barrel on the New York Mercantile Exchange and was at $33.12 at 11.09am Hong Kong time. The contract climbed 40 cents to $33.62 a barrel on Friday to cap a 4.4 per cent weekly increase. Total volume traded was almost triple the 100-day average.

Brent for April settlement declined as much as 73 cents, or 2 per cent, to $35.26 a barrel on the London-based ICE Futures Europe exchange. The March contract expired Friday after advancing 85 cents to $34.74. The European benchmark crude was at a premium of 60 cents to WTI for April.

Opec’s January output includes 815,000 barrels from Indonesia, which contributed for the first time since its membership was restored January 1 after a seven-year suspension, according to a Bloomberg survey. Nigeria’s production increased 109,000 barrels a day to 2.028 million, the highest in a year, while Kuwait pumped an additional 100,000 barrels a day and Iran added 60,000 barrels a day.

China’s manufacturing PMIcame in lower than a median estimate of 49.6 in a Bloomberg survey of economists, and represents the longest stretch on record of readings under 50, the level below which indicates contraction.

Hedge funds increased bullish bets by the most since 2010, according to data Friday from the US Commodity Futures Trading Commission. Speculators’ net-long position in WTI rose 35 per cent in the week ended January 26 to 110,432 contracts of futures and options.

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