BLBG: Oil Drops as Equities Decline on Concern About Deeper Recession
June 23 (Bloomberg) -- Crude oil fell for a third day in New York, following equity markets lower amid concerns that the global economic recovery will be slower than some forecasts.
Oil traded below $67 a barrel as equities in developing nations fell, dragging the MSCI Emerging Markets Index down 10 percent from its 2009 peak. Oil is down more than $6 from this year’s high of $73.23, approaching the 10 percent decline that analysts including Stephen Schork consider to be a correction.
“Exuberance in the crude oil market is waning,” Schork, president of the Schork Group in Villanova, Pennsylvania, told clients today in a note. “Telltales appear that a correction in crude oil is imminent. As far as today goes, we have changed our daily technical bias to bearish.”
Crude oil for August delivery declined as much as $1.13, or 1.7 percent, to $66.37 a barrel on the New York Mercantile Exchange. It traded at $67.06 at 11:03 a.m. in London. The July contract expired yesterday at $66.93.
The MSCI Emerging Markets Index of 22 countries lost 2 percent, the most in four days, as of 10:34 a.m. in London. U.S. and European stocks fell yesterday after the World Bank projected the global economy will contract 2.9 percent this year, more than an earlier projection of 1.7 percent.
“What’s behind the movement is a change in sentiment,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. “Before, we were expecting a real demand recovery. Now, we’re pricing in a slowdown of the slowdown.”
Falling Demand
Total U.S. daily fuel demand in the four weeks ended June 12 was down 6 percent from a year earlier, the Energy Department said last week. Gasoline inventories rose 3.39 million barrels to 205 million in the week ended June 12, the biggest increase since January, the department said.
Gasoline supplies rose 1 million barrels last week, according to the median of 10 estimates by analysts surveyed by Bloomberg News. The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.
Brent crude oil for August settlement dropped as much as $1.08, or 1.6 percent, to $65.90 a barrel on London’s ICE Futures Europe exchange. It traded at $66.65 at 11:03 a.m. London time.
“Oil prices had run ahead of fundamentals. A pretty big disconnect had opened up,” said Mike Wittner, head of oil market research at Societe Generale SA in London. “We are seeing some closure of that disconnect.”
Iran Impact
Oil analysts said continuing civil unrest in Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, isn’t helping oil prices.
Iran’s Revolutionary Guards vowed to “put an end to the chaos” of street protests against the re-election of President Mahmoud Ahmadinejad. State-run Press TV yesterday cited the country’s OPEC governor, Mohammad Ali Khatibi, as telling the Iran Daily newspaper there’s been no impact on crude exports.
“The bullish trend in crude oil has failed to perpetuate despite the introduction of bullish headlines from Iran,” said Schork. “Crude oil’s rapid rise has stalled. A market that cannot move higher on news like that appears ripe for a further selloff.”
