SG:Oil Futures drop below USD 80 for first time in 8 months
According to the Energy Department, oil in New York tumbled below USD 80 per barrel and Brent crude fell under USD 90 as reports signaling a global economic slowdown added to concern that demand will slow amid rising supplies. Futures dropped 4% the most this year, as manufacturing slumped in the US, China and Europe applications for US unemployment benefits exceeded estimates and sales of existing homes were lower than expected. Oilstockpiles rose last week to the most since 1990.
Mr Rick Mueller principal with ESAI Energy LLC in Wakefield, Massachusetts said that “The oil market is finally starting to catch up with the weak fundamentals. The US and Chinese economies are looking weaker which is raising concerns about demand during the second half of the year.”
Crude futures for August delivery fell USD 3.25 per barrel to USD 78.20 per barrel on the New York Mercantile Exchange, the lowest settlement since October 4th 2012. The price is down 21% in 2012. Brent oil for August decreased USD 3.46 or 3.7% to USD 89.23 per barrel on the London based ICE Futures Europe exchange, the lowest settlement since December 2010. The European benchmark’s premium to West Texas Intermediate settled at USD 11.03, the lowest level since January.
Mr Michael Lynch president of Strategic Energy & Economic Research in Winchester, Massachusetts said that “Fears about the economy are making people very leery. The jobless claims, the manufacturing data and all the economic data are coming together to push almost everything down.”
The Federal Reserve Bank of Philadelphia’s general economic index showed that manufacturing in the Philadelphia region shrank in June. Analysts predicted no change. Factory output also declined in Europe and China as Europe’s worsening fiscal situation clouded global economic-growth prospects. US crude inventories increased 2.86 million barrels to 387.3 million barrels last week, the highest level since July 1990. Stockpiles of distillate fuel and gasoline also increased.
Mr Phil Flynn senior market analyst at the Price Futures Group in Chicago said that “People are just killing everything on global economic concern. Supply is just overwhelming right now. There’s not a lot of reasons to be aggressive on long side.”
The Labor Department said that US jobless claims decreased by 2,000 to 387,000 in the week ended June 16th2012. The medianforecast of economists surveyed by Bloomberg called for 383,000. The 4 week average, a less volatile measure, climbed to the highest level of the year.
The National Association of Realtors said that purchases of existing US properties dropped and the Bloomberg Consumer Comfort Index showed the fewest Americans in five months said the economy was improving in June.
Mr Kyle Cooper director of commodities research at IAF Advisors in Houston said that “It doesn’t look like the economy is taking off anytime soon and oil demand is pretty poor. That’s hurting oil prices. There is certainly a huge build overall across the oil complex. Prices also dropped as the euro weakened against the dollar and as US stocks slipped. The European currency slipped as much as 1.4%. A declining euro reduces oil’s appeal as an investment alternative. The Standard & Poor’s 500 Index declined 2.2%. The Standard & Poor’s GSCI Index of 24 commodities fell 2.8%.
Mr Rich Ilczyszyn chief market strategist and founder of Iitrader said that “Oil is participating in the broad decline of equities and commodities. We broke an extremely key level for oil, the previous monthly low around $81.” The relative strength index or RSI, of front month oil futures fell to 22.22. The RSI, which identifies possible turning points in markets, dropped to 16.3 on June 1st 2012.
Mr Carl Larry president of Oil Outlooks & Opinions LLC in New York said that crude has dropped 6.9 percent this week as economic data have missed expectations. Federal Reserve officials cut their estimates for 2012 growth after last month’s slowdown in hiring and said they expect little progress on unemployment during the rest of the year. The oil market is taking the Fed statement as a bearish sign. Commodities are overly sensitive to the Fed.
