SF: Oil Drops on Signs of Slowdown; Gulf Workers Return After Storm
Sept. 5 (Bloomberg) -- Oil fell, dipping below $84 a barrel in New York for the first time in a week, on speculation that slowing economic growth in the U.S. and China will crimp fuel consumption in the world's two biggest crude users.
Futures fell as much as 2.9 percent after a Chinese services index published today fell to a record low in August. A report tomorrow may say U.S. service industries grew at the slowest pace in more than a year. Crude also declined as Exxon Mobil Corp. and Royal Dutch Shell Plc returned workers to some oil and natural gas platforms after Tropical Depression Lee moved out of the Gulf of Mexico. London-traded Brent widened its premium to U.S. prices for a second day.
"There's no impetus to break higher," said Tobias Merath, head of commodities research at Credit Suisse AG in Zurich, who expects oil to trade in a range of $80 to $90 a barrel this month. "There has been a deterioration in the economic indicators and problems on the funding side. When you have that combination it can be pretty nasty for the market."
Crude for October delivery fell as much as $2.46 to $83.99 a barrel in electronic trading on the New York Mercantile Exchange, the lowest price since Aug. 26, and was at $84.30 at 11:34 a.m. New York time. Prices slumped 2.8 percent on Sept. 2 and have risen 13 percent in the past year. There will be no Nymex floor trading today because of the Labor Day holiday.
Employment, Services
Brent oil for October settlement decreased $1.52, or 1.4 percent, to $110.81 on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $26.51 to U.S. futures, compared with a record close of $26.21 on Aug. 19 and an intraday record of $26.97 on Sept. 2.
Oil slid on signs the global recovery is fading while European policymakers struggle to resolve the region's debt crisis. Citigroup Inc. cut its 2011 global economic growth forecast today to 3.1 percent from 3.7 percent. U.S. German Chancellor Angela Merkel's party lost weekend elections in her home state, stoking concern opposition is growing to bailouts for debt-saddled European nations.
The MSCI All-Country World Index sank 2 percent as of 11:33 a.m. in New York.
The Institute for Supply Management's non-manufacturing index fell to 51 last month, the lowest since January 2010, from 52.7 in July, according to the median of 59 forecasts in a Bloomberg News survey ahead of the Sept. 6 release.
China PMI
A purchasing managers' index in China, the world's second biggest crude consumer, dropped to 50.6 from 53.5 in July. The reading, near the borderline of 50 that marks expansion or contraction, was the lowest since the series began in November 2005, according to a statement issued by HSBC Holdings Plc.
On Sept. 2, crude in New York fell $2.48 after the Labor Department said U.S. payrolls were unchanged last month, the weakest reading since September 2010.
In the Gulf of Mexico, Lee weakened from a tropical storm to a depression after making landfall and soaking Louisiana and much of the nearby Gulf Coast. About 60 percent of oil production and 44 percent of natural gas output was halted in the Gulf of Mexico, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.
The weather system was about 60 miles (95 kilometers) east- southeast of Alexandria, Louisiana, moving east-northeast at 7 miles per hour, the U.S. National Hurricane Center said in an advisory at 10 p.m. Central Daylight Time yesterday.
Hedge Fund Bets
Crews are resuming production in the western Gulf after inspecting equipment for damage, David Eglinton, a spokesman for Exxon Mobil, based in Irving, Texas, said yesterday in an e- mail. Shell confirmed it began returning staff after evacuating as many as 858 workers.
Hedge funds boosted bullish bets on New York oil by the most since March last week as Hurricane Irene took aim at the U.S. East Coast, threatening imports, pipelines and refineries. The funds and other large speculators increased wagers that prices will rise by 13 percent in the week ended Aug. 30, according to the Commodity Futures Trading Commission's Sept. 2 Commitments of Traders report.
Speculative bets by money managers that Brent crude will rise increased by 48 percent in the same period, according to data from ICE Futures Europe. Net-long positions rose by 20,942 contracts from 43,489 a week earlier, the exchange said today in its weekly Commitment of Traders report.
