BLBG: Crude Oil Decreases Amid Increasing Risks From European Credit Crisis
Oil fell for a second day on the growing risks from Europe’s debt crisis.
Prices dropped as much as 0.6 percent after Italy auctioned 7.02 billion euros ($9 billion) of bonds, short of the target, and the euro dropped to a 15-month low. Futures rose earlier as a measure of U.S. jobless claims dropped to a three-year low.
“The European situation seems to be taking center stage, but the U.S. jobless claims numbers were pretty good,” said Phil Flynn, an analyst with PFGBest in Chicago. “The U.S. employment situation is improving and the world’s largest economy is getting a little bit better.”
Crude for February delivery dropped 40 cents, or 0.4 percent, to $98.96 a barrel at 9:41 a.m. on the New York Mercantile Exchange. The contract closed at $99.36 yesterday, the lowest level since Dec. 21. Prices are up 8.3 percent this year after climbing 15 percent in 2010.
Brent oil for February settlement slid 57 cents, or 0.5 percent, to $106.99 a barrel on the London-based ICE Futures Europe exchange.
The euro fell as much as 0.6 percent to $1.2858, its lowest level against the dollar since September 2010 and 10-year Italian notes slid after the Italian bond auction. A weaker euro and stronger dollar reduces oil’s appeal as an investment alternative.
Jobless Claims
The four-week moving average for jobless claims, a less volatile measure than the weekly figures, dropped to 375,000 last week, the lowest level since June 2008, Labor Department data showed in Washington. Jobless claims rose for the first time in a month in the week ended Dec. 24, climbing by a more- than-forecast 15,000 to 381,000.
Oil also strengthened earlier on geopolitical tension in the Middle East.
A U.S. aircraft carrier was spotted in the area where Iran is conducting naval exercises, the state-run Islamic Republic News Agency reported today, citing navy Deputy Commander Mahmoud Mousavi. Iran’s navy started the exercises on Dec. 24 and plans to conclude the drills on Jan. 4, the news agency reported.
The country will block oil shipments through the Strait of Hormuz if sanctions are imposed on its crude exports, the Islamic Republic News Agency reported on Dec. 27, citing Vice President Mohammad Reza Rahimi.
Iran (OPCRIRAN) pumped 3.56 million barrels a day of crude in November, making it the second largest producer in the Organization of Petroleum Exporting Countries, according to data compiled by Bloomberg.
Crude supplies probably fell 2.5 million barrels last week, according to a Bloomberg News survey before an Energy Department report at 11 a.m. in Washington. Heating oil and gasoline inventories are also poised to drop, the survey showed. The government is scheduled to release its weekly inventory data a day later than usual because of the Christmas holiday.
Crude inventories rose 9.57 million barrels last week, the industry-funded American Petroleum Institute reported yesterday.
-- With assistance from Bob Willis in Washington, Alessandra Migliaccio in Rome and Shaji Mathew in Dubai. Editors: Margot Habiby, Richard Stubbe
To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
