BLBG: Oil Drops in New York on European Debt Crisis as Euro Tumbles Most in Week
Oil fell as investors bet that Europe’s worsening debt crisis may slow the economy and crimp fuel demand, and as the euro tumbled the most in a week against the dollar.
Futures dropped as much as 2.5 percent on speculation that European leaders won’t agree on a way to contain the region’s debt crisis at a summit this week. Futures also fell as equities declined amid concern that U.S. lawmakers will fail to reach a deal on the country’s debt limit two weeks before a deadline.
“Some of the fears of the debt crisis seem to be weighing on the market to start the week,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The dollar is higher and that’s kind of weighing on prices.”
Crude for August delivery dropped $2.15, or 2.2 percent, to $95.09 a barrel at 10:47 a.m. on the New York Mercantile Exchange. Earlier, it touched $94.85. Futures have risen 25 percent in the past year.
Brent for September settlement slipped $1.89, or 1.6 percent, to $115.37 a barrel on the ICE Futures Europe exchange. Prices are 53 percent higher than a year ago.
The euro fell 0.9 percent to $1.403 in New York. A weaker euro and stronger dollar curbs the appeal of commodities as an alternative investment.
The special summit by European leaders this week comes after eight of the region’s banks failed stress tests. European Central Bank President Jean-Claude Trichet repeated his opposition to any restructuring of Greek debt.
“The market has retreated this morning as the dollar has strengthened, making the general outlook for commodities less positive,” said Christopher Bellew, senior broker at Jefferies Bache Ltd. in London. “Brent prices have been confined to a broad range of $105 to $120, but within that there’s a lot of unpredictability.”
The Standard & Poor’s 500 Index dropped 1.1 percent to 1,302.12, and the Dow Jones Industrial Average fell 139.68 points, or 1.1 percent, to 12,340.05.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
