Oil Futures Decline on Mix of Economic, Market Signals

NEW YORK--U.S. oil prices turned downward Monday on a mix of several signals that suggested traders may be overexposed to risks from a growing supply of oil.

Light, sweet crude for July delivery settled down 24 cents, or 0.2%, at $102.47 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe also settled down 47 cents, or 0.4%, at $108.94 a barrel.

Recent days have brought signs of rising supplies from Angola, Iraq and Libya. Several analysts also noted the recent calm between Russia and neighboring Ukraine, with signs that the Russian oil industry isn't slowing production at all.

All that coupled Monday with signs that the world may have less business to use up the growing supply. Key measures of manufacturing growth came in lower than expected, pushing prices down, Tim Evans of Citi Futures Perspective said in a note.

There is "no particular sign of broader economic acceleration that would signal stronger-than-expected petroleum demand," Evans wrote.

If that turns out to be the case, oil investors are in a risky position. Andy Lebow, senior vice president for energy derivatives at Jefferies Bache LLC, noted that prices dropped Monday about the time that ICE Futures exchange put out data showing how big a bet money managers had made on oil prices rising.

Those bets hit an eight-month high last week, according to the data. Money managers, including hedge funds, increased their net long position in Brent crude by 6% week-on-week.

Oil bulls are similarly exposed in the U.S. Managed money's net-long position rose 7.4% in the week that ended June 27, hitting 348,069, the largest such position since at least June 2006, according to data the U.S. Commodity Futures Trading Commission released after the market closed Friday.

"I think the market has got to be worried about the length that it's holding right now," Mr. Lebow said, calling it a potentially "dangerous sign."

The U.S. has been awash in new domestic supplies thanks to the unconventional drilling boom. U.S. stocks climbed to 393 million barrels last week, not far from the record high of 399.4 million barrels reached in the week ended April 25, according to the U.S. Energy Information Administration. U.S. consumer spending had also fallen from March to April, which helped push prices down last week.

Front-month July reformulated gasoline blendstock, or RBOB, settled down 2.2 cents, or 0.7%, at $2.9499 a gallon. July diesel declined 10.9 cents, or 0.4%, to $2.8773 a gallon.