WSJ: OIL FUTURES: Oil Declines As Debt Worries Weigh
By Dan Strumpf
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Oil futures declined Monday as worries about the European debt crisis sent the dollar rallying against the euro.
Light, sweet crude for August delivery fell $1.09, or 1.1%, to $96.15 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe exchange gave up 81 cents, or 0.7%, to $116.45 a barrel.
The euro fell to a low of $1.40145 intraday as skepticism persisted over last week's stress tests on European banks, which some have criticized as too lenient. Euro-zone leaders were scheduled to meet on Thursday as pressure mounted for a new bailout agreement for Greece.
Oil markets are likely to continue tracking currency markets Monday in the absence of fundamental news, analysts said. A stronger dollar typically pressures crude prices by making the dollar-denominated commodity more expensive for holders of other currencies. The continent's debt crisis has also weighed on crude prices because it has spurred concerns that energy demand could be weakening.
"Worries about the economy are the central theme about how the oil markets moving right now," said Gene McGillian, analyst and broker at Tradition Energy.
Nymex crude prices have largely held between $90 and $100 a barrel over the last month. Unease about the sluggish economic recovery in the U.S.--the world's largest crude consumer--and debt problems in Europe have kept oil futures below their recent highs of around $115 a barrel reached earlier this year.
However, strong growth in emerging economies like China, the No. 2 oil consumer and concerns about supply from Libya and elsewhere in the Middle East and Africa have kept a floor under prices around the $90 mark, analysts say.
Attention will shift later this week to debt problems in the U.S., where Congressional leaders have yet to find a solution ahead of an Aug. 2 deadline to increase the country's $14.29 trillion borrowing limit.
The debt-ceiling debate doesn't have a direct bearing on oil markets. However, traders will still be closely eyeing the negotiations for its impact elsewhere, including on equities and currency markets. A failure to solve the impasse would likely trigger a flight from risky assets, including commodities and stocks, analysts say.
"We will look for oil to follow the stock market on any dramatic reaction to a breakthrough or a breakdown in the debt ceiling negotiations," said Jim Ritterbusch, head of Ritterbusch and Associates, in a research report.
Front-month August reformulated gasoline blendstock, or RBOB, recently fell 3.10 cents, or 0.9%, to $3.0983 a gallon. August heating oil fell 2.37 cents, or 0.8%, to $3.0943 a gallon.
-By Dan Strumpf, Dow Jones Newswires; 212-416-2818; dan.strumpf@dowjones.com.
