SF: Oil Falls to Two-Week Low on Speculation Fuel Demand May Falter
Nov. 16 (Bloomberg) -- Oil declined for a third day to trade at a two-week low on speculation Europe's deepening debt crisis and government steps to cool Asia's economic growth will reduce demand for commodities.
Futures fell after the Bank of Korea raised interest rates for the second time this year and the China Securities Journal said the Chinese government will take further steps to control price increases, while European ministers gathered in Brussels to discuss aid to Ireland's banks. An Energy Department report tomorrow may still show U.S. crude stockpiles fell last week.
"European debt problems have re-emerged, scaring away investors from risky assets such as oil," said Thorbjoern Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark. "We expect oil to continue trading in range between $81 and $90."
The December crude contract on the New York Mercantile Exchange dropped as much as $1.30, or 1.5 percent, to $83.56 a barrel, the lowest price since Nov. 2. The contract was at $83.75 at 1:21 p.m. London time. Brent crude for January settlement lost as much as $1.12, or 1.3 percent, to $85.64 a barrel on the ICE Futures Europe exchange in London.
The Bank of Korea increased interest rates after inflation surged past the central bank's ceiling. China will introduce measures to control rising food prices, the China Securities Journal reported, citing an unidentified person. The country's central bank boosted lending rates in October for the first time since 2007.
Europe's Debt
Crude also declined as the Dollar Index, which tracks the currency against those of six U.S. trading partners, rose for a second day, limiting the investment appeal of oil. Concern that Ireland's banking crisis is spreading sent the dollar to a six- week high of $1.3561 against the euro.
The benchmark Stoxx Europe 600 Index fell 1.2 percent, erasing yesterday's 0.8 percent gain, as more than five companies dropped for every one that rose.
"There's still a sense of pessimism out there," David Taylor, a market analyst at CMC Markets Ltd. in Sydney, said in a note today. There are "concerns over Ireland's sovereign debt, worries over future rate rises in China and the health of the U.S. economy."
Crude oil may plunge below $80 a barrel in New York as the failure of its relative strength index to keep pace with price gains signals that this month's rally is over, according to technical analysis by Commerzbank AG.
Imminent Correction
Futures surged to a two-year high of $88.63 a barrel on Nov. 11. Oil's 14-day RSI, a measure of how rapidly prices rise or fall in that period, failed that day to surpass a nine-month peak reached in October, indicating gains have run their course and a downward correction may be imminent, Commerzbank said.
The Energy Department report may show U.S. crude stockpiles fell 700,000 barrels last week from 364.9 million barrels, according to the median of nine analyst estimates surveyed by Bloomberg News. Fuel supplies also decreased, the survey showed.
The department will release its Weekly Petroleum Status Report at 10:30 a.m. tomorrow in Washington. The industry-funded American Petroleum Institute will publish its own data today.
