BLBG:Oil Futures Decline for Second Day on Greece Concern, Consumer Spending
Oil declined as European leaders sparred with Greece over a second rescue program and U.S. consumer spending stalled, bolstering concern that economic growth and fuel demand will slow.
Oil fell for a second day as Greece fended off German-led calls for a European overseer to take command of the nation’s budget after deficits surpassed targets for two years. Consumer purchases were little changed in December after rising 0.1 percent the prior month, the Commerce Department reported.
“People were nervous about the Greek talks and the current outlook is pessimistic,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The economic data is affecting the overall outlook.”
Crude for March delivery fell 78 cents, or 0.8 percent, to settle at $98.78 a barrel on the New York Mercantile Exchange. Prices are down 5 cents this month.
Brent oil for March settlement dropped 71 cents, or 0.6 percent, to $110.75 a barrel on the London-based ICE Futures Europe exchange.
Greece’s aid program won’t be finalized today because talks with banks over debt reduction aren’t completed, German Chancellor Angela Merkel said. European Union leaders met in Brussels for the first summit of 2012.
Yesterday, Greek Finance Minister Evangelos Venizelos rejected the idea of appointing a commissioner to oversee the nation’s budget.
“Our partners acknowledge that European integration is based on the institutional equality of nation-states and on respect for their national identity and dignity,” Venizelos said in an e-mailed statement from his office in Athens.
Bigger Cut
European finance officials discussed a deal yesterday that Greece and its private creditors expect to complete in the coming days after bondholders signaled they would accept government demands for a bigger cut in their debt holdings.
“We are down on concerns about Europe,” said Phil Flynn, an analyst at PFGBest in Chicago. “The consumer spending number doesn’t look good.”
The median estimate of 77 economists surveyed by Bloomberg News called for a 0.1 percent increase in U.S. sales. Consumer spending accounts for about 70 percent of the economy.
In the U.S., the union representing more than 30,000 workers at refineries, terminals and pipelines warned members on Jan. 28 that a strike may be imminent as negotiations with the industry near a Feb. 1 deadline.
“Your policy committee is concerned that the lack of more substantive response from the industry will necessitate strike action at one or more locations,” the United Steelworkers said in an update to workers.
Equities, Dollar
Oil also declined as U.S. stocks dropped and the dollar strengthened against the euro. The Standard & Poor’s 500 Index fell as much as 1.2 percent before paring losses after oil settled for the day.
The euro fell as much as 1.1 percent against the dollar. The S&P’s GSCI Index (SPGSCI) of 24 raw materials fell 0.7 percent. A stronger dollar and weaker euro reduce oil’s appeal as an investment alternative.
“All commodities including oil are taking the cue off equities and equities are taking the cue off Europe and Greece,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “Everything is selling off and we are overdue for correction to the downside of equities.”
An index of executive and consumer sentiment in the 17- nation euro area rose to 93.4 in January, less than the median prediction of 93.8 in a Bloomberg survey, European Commission data showed.
Euro Declines
Oil also declined after Organization of Petroleum Exporting Countries Secretary-General Abdalla el-Badri said the oil market is very well supplied. The group is producing 30.6 million barrels a day, he said.
Saudi Arabia’s Oil Minister Ali al-Naimi said in London that the kingdom will continue to be a stable supplier of crude oil to global markets and is able to respond to shortages.
Hedge funds and other large speculators raised bullish wagers on Nymex crude by 10,079, or 5.2 percent, to 204,044 contracts in the seven days ended Jan. 24, the Commodity Futures Trading Commission’s Commitment of Traders reported on Jan. 27.
Money managers increased bullish bets on Brent crude by 404 contracts, or 0.5 percent, to 86,252 lots in the same period, according to ICE Futures Europe’s commitment of traders report. ICE’s data include futures and options.
Oil volume in electronic trading on the Nymex was 399,409 contracts as of 3:13 p.m. in New York. Volume totaled 457,462 on Jan. 27, 21 percent below the three-month average. Open interest was 1.37 million contracts.
To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
