BLBG:Oil Heads for Second Weekly Loss on Europe; Mirae Sees Iran Risk
Oil headed for a second weekly loss in New York as speculation Europe’s debt crisis threatens its economy countered concern that violence in Saudi Arabia may destabilize the world’s biggest crude exporter.
Futures are poised for a 1 percent slide after Portugal and Hungary’s sovereign grade ratings were cut and Germany again ruled out joint euro-area borrowing and an expanded role for the European Central Bank in fighting the crisis. Four people died in clashes this week between Shiite Muslims and Saudi security forces in the oil-rich Eastern Province. Prices may “spike” this winter, according to Mirae Asset Securities Ltd.
“If the Eurozone problems persist, and demand falls, prices are going to come down one way or another,” said Ben Le Brun, a Sydney-based analyst with optionsXpress Inc., a broker. “That’s very much weighing on sentiment, risk markets and volumes as well.”
Oil for January delivery were at $96.42 a barrel, up 25 cents, or 0.3 percent, from the close on Nov. 23 in electronic trading on the New York Mercantile Exchange at 11:42 a.m. in Singapore. Floor trading was suspended yesterday for the U.S. Thanksgiving Day holiday and electronic trades will be booked with today’s transactions for settlement purposes.
Brent crude for January settlement traded at $107.70 a barrel, down 8 cents, on the ICE Futures Europe exchange. Prices are up 0.1 percent this week and 14 percent higher this year. The European benchmark contract was at a premium of $11.25 to New York-traded futures. The spread reached a record $27.88 on Oct. 14.
Brent is likely to fall to $105 a barrel in the first quarter of 2012 and New York’s West Texas Intermediate will decline to $92 on slowing global economic growth, Oversea- Chinese Banking Corp. (OCBC) said in a report yesterday.
Brent Forecast
European crude may slide to $102.50 a barrel in the second quarter and WTI to $90, the bank’s analysts including Selena Ling said in a report dated yesterday.
The European Union accounted for 16 percent of world oil demand in 2010, according to BP Plc’s annual Statistical Review of World Energy. The U.S. consumed 19.1 million barrels a day, or 21 percent of the global total.
Portugal’s sovereign debt rating was cut to junk grade by Fitch Ratings yesterday, while Hungary also lost its investment grade at Moody’s Investors Service. Euro bonds are “not needed and not appropriate,” German Chancellor Angela Merkel said at a press conference with Italian Prime Minister Mario Monti and French President Nicolas Sarkozy in Strasbourg yesterday.
Oil gained 0.7 percent in London yesterday after Saudi Press Agency cited a Ministry of Interior statement saying two people were killed during an exchange of gunfire at the funeral of two others who died earlier this week in the al-Qatif region.
Saudi Arabia
Saudi Arabia’s Shiite minority is concentrated in the kingdom’s eastern oil-producing hub, which lies across a 16-mile (26-kilometer) causeway from Shiite-majority Bahrain, where there were violent clashes in February and March as security forces crushed protests by Shiites demanding democracy and representative government.
Oil may spike this winter as France’s call for a European embargo on crude supplies from Iran increases a “geopolitical premium” on prices, according to Mirae Asset Securities Ltd.
Iran “has a grip” over the Strait of Hormuz, through which about a third of seaborne oil cargoes from the Middle East passes, said Gordon Kwan, head of energy research at Mirae in Hong Kong. Potential military confrontations over Iran’s nuclear program will keep Brent about $10 to $15 a barrel higher than New York futures, he said in e-mailed comments today.
“The oil market has been very complacent about the black swan risk of Iran,” Kwan said. “Escalation of rhetoric towards Iran’s nuclear program has supported oil prices in recent weeks, competing with the gloomy economic headlines as the main driver of oil prices.”
To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
