BLBG: Oil in New York Falls Most in a Week as Banks Cut Global Growth Forecasts
Crude oil declined the most in more than a week as commodities fell around the world after Morgan Stanley and Deutsche Bank AG cut their forecasts for global economic expansion.
Futures dropped as much as 5.8 percent and stocks plunged after Morgan Stanley cited an “insufficient” policy response to Europe’s sovereign debt crisis, weakened confidence and the prospect of fiscal tightening. The declines accelerated after U.S. government data showed that jobless claims rose last week.
“The most recent economic data is what’s guiding all asset classes,” said Adam Sieminski, chief energy economist at Deutsche Bank in Washington. “This means that just about everything but gold is falling right now.”
Crude oil for September delivery dropped $3.94, or 4.5 percent, to $83.64 a barrel at 12:01 p.m. on the New York Mercantile Exchange. The contract fell as low as $82.54. Oil has dropped 8.5 percent this year.
Brent oil for October settlement fell $2.90, or 2.6 percent, to $107.70 a barrel on the London-based ICE Futures Europe exchange. The price has risen 14 percent this year.
The front-month contract of the European benchmark was at a $23.94-a-barrel premium to the October U.S. futures contract, compared with a previous record of $23.79 on Aug. 10, based on closing prices.
Morgan Stanley estimates global economic expansion of 3.9 percent, down from a previous forecast of 4.2 percent, according to an e-mailed report dated today. Morgan Stanley cut its China growth forecast for next year and Deutsche Bank reduced its estimates for the nation for 2011 and 2012.
Chinese Growth
China’s economic growth estimate for next year was cut to 8.7 percent from 9 percent by Morgan Stanley. The bank projects the U.S. economy will increase 2.1 percent in 2012.
“China is going to grow a lot faster than the U.S. even with the downgrade,” Sieminski said. “This will keep WTI under greater downward pressure than Brent.”
The U.S., China and the European Union were responsible for 48 percent of global oil demand in 2010, according to BP Plc’s Statistical Review of World Energy.
U.S. jobless claims climbed by 9,000 to 408,000 in the week ended Aug. 13, the highest in a month, Labor Department figures showed today in Washington. The consumer-price index increased 0.5 percent in July from the prior month, according to the department. The Federal Reserve Bank of Philadelphia’s general economic index plunged to minus 30.7 this month, the lowest since March 2009, from 3.2 in July.
‘Extremely Sensitive’ Markets
“All of the markets are extremely sensitive to economic news, especially when it’s negative,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “We were down overnight on the European debt crisis. The increase in jobless claims, rising CPI and Philly Fed number only added to the negative outlook.”
The Standard & Poor’s 500 Index of stocks declined 3.8 percent to 1,148.99 and the Dow Jones Industrial Average dropped 3.5 percent to 11,010.94. The dollar increased 0.7 percent to $1.4319 against the euro. A stronger U.S. currency reduces the appeal of dollar-denominated commodities as an investment.
“Equities are getting pounded and the euro is falling against the dollar,” said Stephen Schork, president of the Villanova, Pennsylvania-based Schork Group Inc. “Every bourse is taking a hit today.”
The S&P GSCI Index of 24 raw materials fell 2.7 percent to 639.39. Gold and silver were the only commodities to advance. Gold for December delivery rose as much as 2 percent to $1,829.70 an ounce on the Comex in New York.
“The revised growth projections and weak markets are adding to fears about demand going forward,” Bentz said. “Almost all commodities are falling on this concern. Gold is the one exception because it’s seen as a safe haven.”
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
