BLBG:Oil Declines A Second Day On Europe Concern, Iran Talks
Oil fell a second day in New York as rising bad loans in Spain fueled speculation that Europe’s debt crisis will spread and threaten global economic growth.
Futures slid as much as 0.4 percent after declining for the first time in three days yesterday. Spanish bad loans in April jumped to 8.72 percent of lending, the highest level since 1994, data from the Bank of Spain showed, outweighing optimism fanned by weekend election wins for pro-bailout parties in Greece. Talks with Iran, OPEC's second-largest producer, resume today in Moscow over the country’s nuclear program, with President Barack Obama saying there's still time for a diplomatic solution.
“The focus has shifted from Greece to Spain,” Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity-markets newsletter in Sydney, said in a telephone interview today, forecasting that New York oil has support at $80 a barrel. “Iran has been put on the back burner. There’s no Middle Eastern premium being built in.”
Oil for July delivery, which expires tomorrow, fell as much as 35 cents to $82.92 a barrel in electronic trading on the New York Mercantile Exchange at 1:20 p.m. Singapore time. It slipped 0.9 percent yesterday to $83.27, the lowest close since June 13. The more-actively traded August contract slid 38 cents to $83.22 a barrel today. Front-month prices are 16 percent lower this year.
Brent oil for August settlement was at $95.90 a barrel, down 15 cents, on the London-based ICE Futures Europe exchange. It slipped $1.56 yesterday to $96.05. The front-month price for the European benchmark contract was at a premium to West Texas Intermediate of $12.68, from $12.45 yesterday.
Spain, Iran
Spain’s borrowing costs rose to a euro-era record. The yield on 10-year bonds climbed as much as 41 basis points to 7.29 percent yesterday. Yields on five-year and 30-year notes also jumped to the highest since the euro was introduced in 1999.
“There is still a lot of uncertainty over Europe,” said Ken Hasegawa, a commodity derivative sales manager at Newedge Group in Tokyo who expects New York oil to trade between $80 and $85 a barrel and Brent to trade from $95 to $100 in the short term. “Technically, Brent could go down further. The point is whether $95 is supported or not.”
Brent has dropped 21 percent since April 14, when the first international talks with Iran on its nuclear program in 15 months were held in Istanbul. Chinese, French, German, Russian, British and U.S. delegates met with their Iranian counterparts yesterday for a third round of discussions over two days at a hotel near Russia’s Foreign Ministry.
‘Intense’ Talks
Obama said he and Russian President Vladimir Putin agreed at the Group of 20 summit in Mexico that “there’s still time and space” for a diplomatic resolution to tensions over Iran’s “potential development” of nuclear weapons.
The five hours of meetings in Moscow were “constructive and serious,” Ali Bagheri, Iran’s deputy negotiator, told reporters. The talks were “very intense” and more substantive than those in Baghdad last month, according to Michael Mann, a foreign-policy spokesman for the European Union.
The so-called P5+1 group wants Iran to suspend production of uranium enriched to 20 percent, while the Islamic republic is pressing for relief from sanctions set to tighten when an EU oil embargo kicks in on July 1. European insurers and shipping companies carrying Iranian crude to other parts of the world will be affected and shouldn’t expect relief, Mann said in the Russian capital.
U.S. Stockpiles
U.S. crude supplies probably dropped 1.3 million barrels last week, according to the median estimate of seven analysts in a Bloomberg News survey before a report from the Energy Department tomorrow. Gasoline and distillate stockpiles each rose 1 million barrels, the survey shows.
The American Petroleum Institute will release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Enbridge Inc. (ENB) said it expects to boost capacity on its Seaway pipeline to 400,000 barrels a day by the end of this year. The line is already transporting its current capacity of 150,000 barrels a day from Cushing, Oklahoma, to the U.S. Gulf Coast, Enbridge President Al Monaco said yesterday in Toronto. Enterprise Products Partners LP (EPD), which owns the pipeline along with Enbridge, previously said the line’s capacity would be increased by the first quarter of 2013.
Federal Reserve officials begin a two-day meeting today to consider measures to stimulate the world’s biggest economy. The dollar slid against the euro amid prospects that policy makers will consider further stimulus to sustain the U.S. economy.
“Stimulus announcements could possibly be a bullish factor for commodities but I don’t think the Fed will do that at this time,” Hasegawa said. “They will keep things unchanged.”
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
