BLBG:Crude Oil Falls as European Debt Concerns Counter Decline in U.S. Supplies
Oil declined in New York as concern that the European sovereign debt crisis is worsening countered the largest crude-inventory drop since December in the U.S., the biggest consumer of the commodity.
Futures slid as much as 2.1 percent after U.S. equities fell and costs to protect French debt reached a record. The European Central Bank bought Italian and Spanish bonds to help reduce borrowing costs, according to people familiar with the transactions. Switzerland’s central bank said it will “significantly” increase the supply of liquidity to lenders.
“It’s a confidence game at the moment,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who kept his forecast for New York crude to average $100 a barrel this year. The Energy Department data is what “we should focus on but the market isn’t going to look at it. People are more inclined to look at what’s happening in the equity market,” he said.
Crude for September delivery dropped as much as $1.75 to $81.14 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.61 at 11:52 a.m. Sydney time. The contract yesterday rose 4.5 percent to $82.89. Prices are 5.9 percent higher the past year.
Brent oil for September settlement slid 63 cents, or 0.6 percent, to $106.05 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $23.43 to U.S. futures, compared with yesterday’s record close of $23.79.
Equities Fall
The MSCI Asia Pacific Index sank 1.2 percent as of 10:53 a.m. in Tokyo, sliding for the seventh time in eight days. The Standard & Poor’s 500 Index slid 4.4 percent in New York yesterday. That followed its biggest jump in more than two years on Aug. 9 and its worst loss since 2008 on Aug 8. The benchmark Stoxx Europe 600 Index fell to a two-year low as Societe Generale SA, France’s second-biggest lender, dropped 15 percent.
“Market sentiment appears to be outweighing market fundamentals,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. The bank estimates oil in New York will average $100 a barrel in the third quarter. “Just as the U.S. found some market support, Europe’s negative debt situation returned to the fore.”
U.S. crude-oil inventories decreased 5.23 million barrels to 349.8 million last week, according to an Energy Department report. It was the biggest decline since the week ended Dec. 17. Inventories were forecast to climb 1.35 million barrels, according to a Bloomberg News survey of analysts.
‘Storm Clouds’
Total products supplied, a measure of demand, surged 652,000 barrels a day to 20.3 million, the highest level since Dec. 24, according to the report. Gasoline stockpiles dropped 1.59 million barrels to 213.6 million, the report shows.
The International Energy Agency signaled yesterday it may need to cut estimates for global oil demand in 2012 as “storm clouds” threaten economic recovery.
Worldwide oil consumption will expand by 1.6 million barrels a day next year to 91.1 million a day, the Paris-based adviser said in its monthly market report. There are increasing risks that global gross domestic product will fall short of expectations, causing demand instead to advance by 600,000 barrels a day, the IEA said.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net
