BLBG: Oil Snaps Three Days of Declines After Report Shows Drop in U.S. Supplies
Crude oil fell for a fourth day on speculation that China will raise interest rates, slowing economic growth in the world’s biggest energy-consuming country.
Oil dropped as much as 1.4 percent after Chinese Premier Wen Jiabao said the government was drafting measures to counter inflation. Prices also declined on concern Europe’s debt crisis is worsening as ministers considered a rescue package for Irish banks. U.S. crude inventories dropped the most since September 2008, a report showed yesterday.
“We’re retreating on worries that China will raise interest rates to stymie inflation in energy and food prices,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The optimism and euphoria that pushed prices higher last week is fading.”
Crude oil for December delivery fell 52 cents, or 0.6 percent, to $81.82 a barrel at 9:10 a.m. on the New York Mercantile Exchange. Futures have dropped 7.7 percent from the two-year high of $88.63 a barrel reached on Nov. 11.
Brent crude oil for January settlement declined 26 cents, or 0.3 percent, to $84.47 on the London-based ICE Futures Europe exchange.
Oil slipped as Wen’s comments, broadcast yesterday on state television, stoked speculation the government will raise interest rates to damp economic growth. The Bank of Korea yesterday increased borrowing costs after inflation surged past the central bank’s ceiling.
Europe’s Crisis
European finance ministers started work on possible aid for Ireland’s debt-laden banks, stopping short of an immediate bailout package. The country’s crisis is stoking concern that Europe’s debt problems are spreading, weakening the euro versus the dollar and reducing investor demand for commodities priced in the U.S. currency.
Crude inventories dropped 7.65 million barrels last week, the American Petroleum Institute said yesterday. An Energy Department report today will probably show that supplies were unchanged, according to a Bloomberg News survey. Oil-supply estimates from the two organizations have moved in the same direction in seven of the past eight weeks.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
