BLBG:Oil Falls As U.S. Supply Gain Counters Output Disruption
Oil fell in New York to trade below $80 a barrel for a fifth day on speculation demand is ebbing because of higher U.S. crude stockpiles and Europe’s debt woes, countering possible disruptions in output from Iran and Norway.
Futures tumbled as much 0.9 percent after the American Petroleum Institute said inventories rose 507,000 barrels last week. A government report today is forecast to show supplies slid 1.3 million barrels after unexpectedly climbing to a 22- year high the prior week. Iran’s exports will “gradually” fall amid maintenance on fields and reservoirs as a European Union embargo starts, according to Deputy Oil Minister Ahmad Ghalebani. Three more Norwegian fields shut in a labor dispute.
“The market is concerned about the short-term developments such as what’s going on in Europe,” Eugen Weinberg, the head of commodities research at Commerzbank AG in Frankfurt, said by telephone. “Concerns about the weak demand are being reflected, and not the high risks on the supply side in the medium term.”
Oil for August delivery fell as much as 68 cents to $78.68 a barrel in electronic trading on the New York Mercantile Exchange and was at $78.87 at 10:18 a.m. London time. The contract yesterday rose 15 cents, or 0.2 percent, to $79.36, the highest close since June 22. Prices have fallen 25 percent this quarter, the biggest drop since the final three months of 2008.
Brent oil for August settlement dropped 82 cents, or 1 percent, to $92.26 a barrel on the London-based ICE Futures Europe exchange, after surging 2.2 percent yesterday. The European benchmark’s premium to West Texas Intermediate was at $13.39, from $13.66 yesterday.
Forecast Cuts
JPMorgan Chase & Co. and Bocom International Holdings Ltd. reduced forecasts for oil prices this year, citing global economic weakness. Brent will average $107 this year, compared with an earlier prediction of $115, Bocom said in a report today.
The European marker grade will average $95 a barrel in the third quarter, down from a previous prediction of $120, JPMorgan said in a report dated June 25. Fourth-quarter prices will be at $100, down from $125. WTI will be at $88 a barrel in the three months ending September, compared with an earlier forecast of $113, according to the bank.
“The market’s focus remains on euro-zone headlines as sentiment remains negative ahead of the EU summit on the debt crisis at the end of the week,” Andrey Kryuchenkov, a London- based analyst at VTB Capital, said today in an e-mailed note. “Many market participants still fear a prolonged stagnation in Europe that would drag on global growth and, ultimately, oil demand.”
Spanish Bailout
Spain’s recession probably intensified in the second quarter as European sovereign debt woes worsened, the Bank of Spain said today. Spain formally requested a European bailout for its banks on June 25.
Spanish Prime Minister Mariano Rajoy told the country’s parliament that he’ll urge other EU leaders to take steps to stabilize markets “using the available instruments” at a two- day summit in Brussels starting tomorrow. The summit is the first meeting of European leaders since parties supporting a bailout won victories in Greek elections on June 17. France and Italy are urging Germany to help end the debt crisis, now in its third year.
Iran’s crude exports may decline by 20 percent to 30 percent because of field maintenance, Ghalebani, who is also head of National Iranian Oil Co., told reporters at an energy conference in Moscow yesterday. He didn’t give the country’s rate of exports or production was. Iran produced an average 3.14 million barrels a day of oil in May, according to the Organization of Petroleum Exporting Countries, making it the second-biggest producer in the group, after Saudi Arabia.
Strike Escalation
Ghalebani also said that “maybe, yes” Iran’s field maintenance was timed to coincide with the EU sanctions. The ban on oil imports from the Islamic Republic starts on July 1 as part of Western pressure to halt its nuclear program.
The strike by platform workers in Norway, which enters its fourth day today, has halted production of 180,000 barrels a day of oil equivalent. Companies decided to shut the Veslefrikk, Brage and Oseberg C fields yesterday, said Jan Hodneland, chief negotiator of the Norwegian Oil Industry Association, whose members include Statoil ASA (STL) and BP Plc. (BP/)
Oil from the Oseberg field, along with Forties, Brent and Ekofisk, is used to determine Dated Brent, a benchmark price for more than half the world’s petroleum supplies.
The industrywide action is Norway’s first since 2004. The three main unions involved will meet June 29 to discuss a possible escalation, according to Leif Sande, the president of Industry Energy.
U.S. Stockpiles
U.S. gasoline supplies rose 373,000 barrels last week, data from the industry-funded API showed after the settlement yesterday. They are forecast to increase 1 million barrels, according to the median estimate of 12 analysts in a Bloomberg survey before an Energy Department report 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.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Nidaa Bakhsh in London at nbakhsh@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
