By Grant Smith April 19 (Bloomberg) -- Crude oil fell to a three-week low after the Securities and Exchange Commission sued Goldman Sachs Group Inc., causing investors to move away from commodities. Oil declined as European air traffic disruptions caused by Iceland’s Eyjafjallajökull volcano entered a fifth day, limiting demand for jet fuel, while a stronger dollar damped the appeal of commodities for hedging inflation. “The Goldman case may cause deterioration of short-term sentiment,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “With demand in developed economies still stagnating, there’s a good chance oil will hit $80, depending on what happens with the equity market.” Crude oil for May delivery fell as much as $2.71, or 3.3 percent, to $80.53 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest since March 29. It was at $80.82 at 12:19 p.m. London time. Brent crude oil for June settlement was down $2.34 at $83.65 a barrel on the London- based ICE Futures Europe exchange. The May contract, which expires tomorrow, lost $2.27 on April 16 to $83.24 a barrel, the biggest drop since Feb. 5, after the SEC claimed Goldman Sachs misstated key facts about collateralized debt obligations tied to subprime mortgages. The more-widely held June futures in New York were down $2.27 at $82.40 today. Air-Traffic Disruptions As many as 63,000 flights have been canceled after the April 14 eruption of Eyjafjallajökull spewed dust across Europe’s airspace, causing airports from Dublin to Moscow to shutter. Jet fuel’s premium to ICE gasoil futures declined to a two-week low of $41 a metric ton on April 16. The euro fell to a one-week low against the dollar after European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions on a bailout package. The U.S. currency was at $1.3427 per euro at 12:21 p.m. in London compared with $1.3503 in New York on April 16. Speculative net-long positions, or the difference between orders to buy and sell the commodity on the New York Mercantile Exchange, decreased 12 percent to 113,364 contracts on April 13, the commission said last week. “We’ve still got higher-than-average stockpiles in various markets, including the U.S.,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. Fits and Starts “There will be fits and starts to do with the recovery story and this Goldman news is another event that seems to have exposed the fragility of market confidence,” Hassall said “Longer term, the global recovery story is going to continue to drive the oil market.” Oil at $90 a barrel would be harmful and may “jeopardize the market,” according to Angola’s oil minister, Jose Maria Botelho de Vasconcelos. A “good level” is between $70 and $80, he said yesterday at a gas conference in Oran, Algeria. Angola and Qatar are members of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil. The group announced plans in late 2008 to slash output by a record 4.2 million barrels a day to prevent a supply glut as the global economy sank into recession. Ministers voted to maintain official output targets at a March 17 meeting in Vienna. To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net.

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