Oil slid from the highest close in two weeks in New York amid speculation that its biggest gain in more than a month was excessive. Tropical Storm Ernesto was heading westward in the Caribbean after weakening.

Futures slipped as much as 0.5 per cent after surging 4.9 per cent on Aug. 3, the most since June 29. Oil's advance halted after reaching a technical resistance level. Prices finished last week with a gain of 1.4 per cent after US payrolls rose more than estimated and service industries expanded at a faster pace. Ernesto, located about 245 miles east of the Nicaragua and Honduras border, had winds of about 50 mph, down from 60 mph on Aug. 4, according to the US National Hurricane Center.

“The previous peak of around $US93 for West Texas looms as a bit of a psychological resistance level for the market,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. The weakening of tropical storm Ernesto “takes away a potential supply disruption,” he said.

Oil for September delivery slid as much as 45 cents to $US90.95 a barrel in electronic trading on the New York Mercantile Exchange and was at $US91.17 at 10:59 a.m. Sydney time. It surged $US4.27 to $US91.40 on Aug. 3, the highest settlement since July 20. Prices are 7.7 per cent lower this year.

Brent crude for September settlement fell 42 cents, or 0.4 per cent, to $US108.52 a barrel on the London-based ICE Futures Europe exchange. The European benchmark's premium to West Texas Intermediate was at $US17.29 from $US17.54 on Aug. 3.

Technical resistance

Oil is retreating in New York after reaching technical resistance around $US91.85 a barrel, according to data compiled by Bloomberg. That's the higher of two so-called leading span lines that define an “ichimoku cloud,” an area where buy orders tend to be clustered. Futures halted their advance near this line on Aug. 3.

Hedge funds reduced bullish oil bets for the first time in three weeks before reports showing US economic growth sent crude to its biggest gain since June. Money managers cut net- long positions by 2.6 per cent in the seven days ended July 31, according to the Commodity Futures Trading Commission's Commitments of Traders report on Aug. 3. Wagers have dropped 50 per cent from a 2012 high on Feb. 28.

Futures rose on Aug. 3 after Labor Department data showed payrolls gained 163,000 in July compared with a forecast for a 100,000 increase by economists surveyed by Bloomberg News. The Institute for Supply Management's non-manufacturing index unexpectedly climbed.

Ernesto was moving west at 20 mph, the Miami-based center said in an advisory at 8 p.m. local time yesterday. A gradual turn toward the west-northwest with a further decrease in forward speed is expected during the next 48 hours, according to the advisory. The center of Ernesto is forecast to pass to the south of the Cayman Islands and move north of the northeastern coast of Honduras today.

Bloomberg