BLBG:Oil Falls a Second Day on Speculation EU Talks May Fail to Resolve Crisis
Oil dropped for a second day in New York on speculation that European Union leaders meeting today may fail to resolve the region’s debt crisis, while OPEC’s secretary-general said the market is well-supplied.
Futures slipped as much as 0.9 percent as stocks dropped and the dollar strengthened. EU chiefs will gather in Brussels today to complete a German-led deficit-control treaty and endorse a 500 billion-euro ($660 billion) rescue fund. Hedge funds and other large speculators increased wagers on rising crude prices, the Commodity Futures Trading Commission’s Commitment of Traders report on Jan. 27 showed.
“The market is taking off risk before the meeting,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, who predicts Brent crude will average $107 a barrel this quarter. “Ahead of this meeting, sentiment is less optimistic.”
Crude for March delivery fell as much as 85 cents to $98.71 a barrel in electronic trading on the New York Mercantile Exchange. It was at $98.89 at 10:26 a.m. London time. The contract lost 14 cents to $99.56 on Jan. 27. Prices are 0.1 percent higher this month.
Brent oil for March settlement was at $110.95 a barrel, down 51 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $12, compared with $11.90 on Jan. 27 and a record $27.88 on Oct. 14.
Euro Weakens
European stocks fell, headed for the biggest two-day drop in two months. The Stoxx Europe 600 Index slumped as much as 1.1 percent. The euro weakened against the dollar, declining 0.8 percent to $1.3117, making commodities priced in the U.S. currency less appealing.
EU leaders are working to hold the 17-member euro area together with more stringent fiscal rules. Greek bondholders have been pushed to cede more ground after agreeing last year to a 50 percent cut in the face value of more than 200 billion euros of debt.
Greece and its private creditors said on Jan. 28 they expect to complete a deal in coming days after bondholders signaled they would accept European government demands for a bigger cut in their debt holdings.
“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” U.K. Chancellor of the Exchequer George Osborne said at the World Economic Forum in Davos, Switzerland.
Refinery Strikes
In the U.S., a union representing more than 30,000 workers at refineries, terminals and pipelines throughout the country told members on Jan. 28 that a strike may be imminent as negotiations with the industry near a Feb. 1 deadline.
International Atomic Energy Agency inspectors arrived in Tehran yesterday for talks on Iran’s nuclear program. Iran, the second-biggest member of the Organization of Petroleum Exporting Countries, has been at loggerheads with Western countries over accusations its nuclear program is a cover for developing weapons, a charge the government denies. EU foreign ministers agreed on Jan. 23 to ban Iranian oil imports starting in July and freeze the assets of its central bank.
Iranian lawmakers are drafting legislation that calls on the government to halt oil exports to Europe as long as the import ban is in place, Fars news agency reported yesterday. The bill would also require Iran to block imports from countries participating in the EU ban, said Nasser Sodani, deputy head of the parliament’s energy commission.
Market Well-Supplied
OPEC Secretary-General Abdalla el-Badri said in London today the oil market is very well-supplied. Saudi Arabia indicated at a weekend meeting in Istanbul of Turkey and the six member nations of the Gulf Cooperation Council that it could step in if other countries get less oil from Iran, the Financial Times reported.
“There seems like a delay in Iran’s plan to halt oil sales,” said Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore. “The visit by the IAEA will likely add volatility to the oil market over the next few days, depending on what they say.”
Hedge funds and other large speculators raised bullish oil wagers by 10,079, or 5.2 percent, to 204,044 contracts in the seven days ended Jan. 24, according to the CFTC report.
To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net
To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net
