WSJ:OIL FUTURES: Crude Falls On Europe Debt Problems, Weaker Euro
By Cheang Chee Yew
Of DOW JONES NEWSWIRES
SINGAPORE (Dow Jones)--Crude-oil futures traded lower in Asia Monday, tracking declines in regional equity markets, as prices were pressured by concerns over the lack of progress in resolving Europe's debt problems as well as a weaker euro.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded 1.6% lower at $86.58 a barrel at 0647 GMT, down $1.38 in the Globex electronic session. November Brent crude on London's ICE Futures exchange fell 0.9% or $0.97 to $111.25 a barrel.
"It's pretty much the same factors [at play in the oil markets currently]," Barclays Capital analyst Chen Xingyi said.
Risk aversion increased after a meeting of European Union finance ministers over the weekend failed to produce an agreement on how to deal with the region's deepening debt woes.
In addition, the euro extended Friday's losses against the U.S. dollar as investors were unconvinced that European policy makers would act decisively to contain the region's debt problems. A stronger dollar cuts crude prices by making the dollar-denominated commodity costlier for holders of other currencies.
Further weakening of the euro would place additional pressure on Nymex crude, particularly in the context of a declining [oil] demand outlook, Jim Ritterbusch of Ritterbush and Associates said in a note to investors. "A run at trend line support just above the $86 [a barrel] mark per nearby WTI would appear likely."
Abdalla Salem el-Badri, Secretary-General of the Organization of Petroleum Exporting Countries, said Monday that he sees a slowdown in oil demand this year and next due to a deteriorating global economy, and that current crude prices have a risk premium Of $16-$20 a barrel priced in.
Separately, National Australia Bank analysts said in a note that a contraction in global economic growth from 4% to 3.8% in 2011--likely slowing oil demand growth--may cause crude to fall $4-$5 a barrel in the fourth quarter. Nymex crude futures will fall to $87 a barrel in the fourth quarter, while Brent crude will drop to $109 a barrel.
Nymex reformulated gasoline blendstock for October--the benchmark gasoline contract--fell 253 points to $2.7588 a gallon, while October heating oil traded at $2.9831, 231 points lower.
ICE gasoil for October changed hands at $941.50 a metric ton, down $9.25 from Friday's settlement.
