BLBG: Crude Trades Near Six-Week Low in New York on Outlook for Economy, Supply
Crude oil traded near its lowest level in more than six weeks amid speculation that economic recovery in the U.S. may be slowing, stifling demand for fuel.
Crude is likely to drop this week on signals that the U.S. economic recovery is slowing, bolstering stockpiles, a Bloomberg News survey showed. Hedge funds cut bullish bets on gasoline by the most in almost four years as petroleum stockpiles surpassed the highest level since 1990 and the U.S. vacation season drew to an end.
Crude oil for October delivery was up 8 cents at $73.90 a barrel on the New York Mercantile Exchange at 10:30 a.m. London time. The September contract fell 97 cents to $73.46 on Aug. 20, when it expired, the lowest settlement level since July 6. Futures dropped 2.6 percent last week. Brent crude for October rose 22 cents to $74.48 a barrel on the London-based ICE Futures Europe Exchange.
“There is still a slight chance of a second wave of recession,” said Gerrit Zambo, a trader with Bayerische Landesbank in Munich. “All this is driving bearish sentiment in the market. For the rest of the year I see no shortages, no exploding demand. I see the oil markets very saturated.”
The U.S. Labor Department said last week initial claims for unemployment benefits climbed to the highest level since November. Purchases of new and existing houses in the U.S. probably dropped 12 percent to a 5.01 million annual pace, the lowest since March 2009, according to the median forecast of 54 economists surveyed by Bloomberg News.
Hedge funds and other large speculators reduced wagers on rising prices by 74 percent the week ended Aug. 17, the most since October 2006, the Commodity Futures Trading Commission reported on Aug. 20. Gasoline has dropped 21 percent since reaching its 2010 high of $2.4351 a gallon on the New York Mercantile Exchange on May 3.
“People are just taking money off the table.” said Rich Ilczyszyn, a senior market strategist at Lind-Waldock & Co., a 45-year-old Chicago-based futures brokerage for institutional and individual investors. “We’re going to start trading down all the way to January.”
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net
