BS: Oil Fluctuates on Supply Decline, ECB Rate Cut
Crude fluctuated after a U.S. Energy Department report showed that stockpiles dropped and as the dollar rose against the euro on the European Central Bank’s reduction of interest rates to a record low.
Supplies fell 4.27 million barrels to 382.9 million last week, the biggest decrease since December, the report showed. Inventories were forecast to decline 2.3 million barrels, according to a Bloomberg survey. Oil decreased as much as 1.3 percent earlier after ECB President Mario Draghi said economic risks remain after the bank cut rates and the dollar gained.
“We got a bid from the draw in crude stocks,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We were down earlier because of the dollar and will probably end lower unless the financial markets turn around.”
Crude for August delivery rose 5 cents to $87.71 a barrel at 11:35 a.m. on the New York Mercantile Exchange. The contract surged to $88.98 earlier, the highest level since May 30. Prices are down 11 percent this year.
There was no floor trading yesterday because of the U.S. Independence Day holiday. Transactions since the last close will be booked with today’s trades for settlement purposes.
Some “downside risks to the euro-area economic outlook have materialized,” Draghi said at a press conference in Frankfurt after lowering the main refinancing rate and the deposit rate by 25 basis points to 0.75 percent and zero respectively. “Economic growth in the euro area continues to remain weak with heightened uncertainty weighing on both confidence and sentiment,” he said.
Dollar Advances
The dollar rose as much as 1.3 percent against the euro. An increasing U.S. currency reduces the appeal of commodities to investors. The Standard & Poor’s 500 Index (SPX) decreased 0.2 percent, and the Dow Jones Industrial Average fell 0.1 percent.
Service industries in the U.S. expanded in June at the slowest pace since January 2010, a sign the biggest part of the economy is struggling to gain momentum. The Institute for Supply Management’s non-manufacturing index fell to 52.1 from 53.7 in May, the Tempe, Arizona-based group said today. The median forecast of 70 economists surveyed by Bloomberg called for 53.
Brent oil in London rose as Statoil ASA (STL), Norway’s largest crude producer, prepared to halt output. The Norwegian Oil Industry Association, which represents employers, will ban all members of three labor unions who are covered by offshore pay agreements from midnight on July 9, Statoil said.
Brent oil for August settlement advanced $1.60, or 1.6 percent, to $101.37 a barrel on the London-based ICE Futures Europe exchange. It touched $102.34 during the session, the highest level since June 7.
Norwegian Output
The planned lockout of oil workers in Norway will halt the nation’s entire offshore production, which totals about 2 million barrels a day of oil equivalent, Bard Glad Pedersen, a spokesman for Statoil ASA, said by phone today from Oslo.
“This strike and potential shutdown negatively impacts North Sea supply, as such the price of the Brent benchmark; that’s why this is significant,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “The government has the legal right to end the strike and prevent the shutdown. The question is when they’ll use it.”
To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
