BLBG:Crude Heads for First Weekly Decline in Three Weeks on U.S. Debt Concern
Oil headed for its first weekly decline in three weeks, as concern U.S. debt ratings may be cut outweighed prospects for economic expansion in the world’s biggest crude user.
Futures have declined 2.1 percent in London and 0.5 percent in New York this week. Treasury Secretary Timothy F. Geithner said yesterday that there’s no possible extension to the time limit to raise the debt ceiling, while Standard & Poor’s joined Moody’s Investors Service in reviewing the U.S. rating. Crude may rebound next week, according to a Bloomberg News survey of traders and analysts.
“The warnings from S&P and Moody’s on the possible downgrade of the U.S. rating are weighing on the oil price, as well as higher risk aversion,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.
Brent oil for September settlement dropped as much as $1.10, or 1 percent, to $115.73 a barrel on the London-based ICE Futures Europe exchange. It was at $115.90 a barrel, down 36 cents, as of 11:57 a.m. London time. Crude for August delivery on the New York Mercantile Exchange was down 1 cent at $95.68 a barrel after earlier gaining as much as 65 cents. The contract yesterday declined $2.36 to $95.69, the lowest since July 11.
Federal Reserve Chairman Ben S. Bernanke said yesterday he’s not prepared to take immediate action to stimulate the economy. U.S. data today may show improving consumer sentiment and industrial output.
Price Increase Forecast
Thirteen of 30 analysts in a Bloomberg survey, or 43 percent, forecast oil will rise through July 22. Eleven respondents, or 37 percent, predicted prices will fall and six estimated there will be little change. Last week, 51 percent of those surveyed said futures would drop.
North Sea Brent crude oil’s premium to West Texas Intermediate, the U.S. benchmark, narrowed from yesterday’s record high. The difference between contracts traded on London’s ICE Futures Europe Exchange and the New York Mercantile Exchange was $19.81 a barrel at 11:57 a.m. London time.
The spread ended yesterday’s session at $22.63 a barrel, above the previous high of $22.29 based on settlement prices on June 15. The premium touched $23.55 in yesterday’s intraday trading, also the highest level ever.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
