BLBG: Crude Oil Falls for First Time in Seven Days on Reduced Iran Concern
Oil fell for the first time in seven days on reduced concern that Iran will block the Strait of Hormuz and as the dollar climbed against the euro.
Futures dropped as much as 0.8 percent as the Associated Press cited an unidentified Saudi oil official as saying Gulf Arab countries are prepared to make up for any loss of Iranian crude. The U.S. currency rose as much as 0.6 percent to $1.2994 against the euro, curbing investor demand for commodities.
“The market has lost momentum,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We’re still paying attention to the same geopolitical and economic factors, but there’s less of a reaction.”
Crude oil for February delivery decreased 84 cents, or 0.8 percent, to $100.50 a barrel at 9:50 a.m. on the New York Mercantile Exchange. Earlier, prices touched $100.48 a barrel. Futures have climbed 10 percent this year, extending last year’s advance of 15 percent.
Brent oil for February settlement fell $1.02, or 0.9 percent, to $108.25 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to crude in New York was $7.75 a barrel, compared with $7.93 at yesterday’s close, the smallest differential based on settlement prices since Jan. 20.
New York oil prices surged 1.7 percent to $101.34 yesterday, the highest settlement since Nov. 16, during a period of slow trading. Volume was 167,547 on Dec. 23, the lowest level since Dec. 26, 2008, and down 73 percent from the average of the past three months. Open interest was 1.31 million contracts.
“The significant rally yesterday was probably exaggerated because of low volume,” McGillian said. “It looks like we will head for the $103.37 high but it will be a bit of a grind.”
About 15.5 million barrels of oil a day, or a sixth of global consumption, passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department. Iran’s navy started a 10-day exercise east of the passage that involved the use of submarines, ground- to-sea missile systems and torpedoes, Press TV said Dec. 24.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
