BLBG:Oil Declines to One-Week Low on Signals Economic Growth to Slow
Oil fell to a one-week low in New York on speculation fuel demand will falter amid signs of weaker economic growth in the U.S., the world’s largest consumer of crude, and a worsening debt crisis in Europe. Brent oil’s premium to U.S. futures widened.
Futures dropped as much as 1.5 percent, extending a 1.6 percent decline on Sept. 16 when European finance ministers ruled out using stimulus measures to spur the economy. Reports this week may show U.S. home sales stagnated in August while construction fell. Government data last week showed U.S. fuel use shrank 3.8 percent. Oil also declined after front-month futures failed to breach the 50-day moving average.
“Europe will be a pessimistic weight around the crude market for some time,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “The major concern driving the market is where the U.S. consumer and their use of petroleum products is heading. While that doubt is still there, oil prices will look weak.”
Oil for October delivery fell as much as $1.31 to $86.65 in electronic trading on the New York Mercantile Exchange, the lowest intraday price since Sept. 12. It was at $86.87 at 12:11 p.m. Singapore time. The more actively traded November contract slid $1.12, or 1.3 percent, to $87.06.
Brent crude for November settlement dropped 82 cents, or 0.7 percent, to $111.40 a barrel on the London-based ICE Futures Europe Exchange. The contract fell 8 cents on Sept. 16. The European benchmark future was at a premium of $24.35 to the West Texas Intermediate November price, compared with $24.04 previously and a record settlement of $26.87 on Sept. 6.
Europe Crisis
European finance heads meeting with U.S. Treasury Secretary Timothy Geithner last week in Poland said their 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy that will barely grow in the second half of 2011. The 17 euro nations accounted for about 12 percent of global oil demand in 2010, according to Bloomberg calculations based on BP Plc’s Statistical Review of World Energy.
U.S. housing starts probably dropped 2.3 percent in August from July, according to the median estimate by economists in a Bloomberg survey before a Commerce Department report tomorrow. Existing-home sales rose 1.7 percent from an eight-month low, a separate survey showed.
Hedge funds raised bullish bets on oil by the most since March in the week ended Sept. 13 as a storm curtailed production in the Gulf of Mexico, according to the Commodity Futures Trading Commission’s Commitments of Traders report. West Texas futures gained 4.9 percent in the period of the report and have dropped 3.7 percent since then.
Technical Analysis
There are currently no named storms or tropical cyclones in the Atlantic or Pacific, the U.S. National Hurricane Center’s website shows. Tropical Storm Maria was downgraded to a post- tropical cyclone on Sept. 16 after crossing Newfoundland, according to the center.
Oil in New York also declined after front-month futures failed to breach the 50-day moving average for a fourth day on Sept. 16, according to data compiled by Bloomberg. This indicator is at $90.16 a barrel today. Investors tend to sell contracts when a price advance stalls below a technical- resistance level.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
