WSJ:OIL FUTURES: Crude Falls in Asia; Focus on U.S. Fiscal Cliff
By Eric Yep
Crude-oil futures fell in Asian trade Tuesday due to disappointing manufacturing data from the U.S. and as concerns persist over the looming U.S. fiscal cliff.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $88.71 a barrel at 0630 GMT, down $0.38 in the Globex electronic session. January Brent crude on London's ICE Futures exchange fell $0.15 to $110.77 a barrel.
The Institute of Supply Management reported Monday that its purchasing managers' index fell to 49.5 last month from 51.7 in October. Economists had expected a slight decline to 51. Readings below 50 indicate contracting factory activity, which is bearish for oil demand.
Manufacturers are concerned about the impact of the so-called fiscal cliff--tax increases and spending cuts by the U.S. expected early next year--on the economy.
"If the U.S. enters a recession, the critical question is how the impact of a U.S. slowdown filters into the relatively oil-intensive emerging market economies that drive global oil demand growth," JP Morgan said in a note.
According to the bank's economists, a 1% decline in U.S. economic growth translates into a 0.7% decline in economic growth in the rest of the world. The U.S. going over the fiscal cliff could slow oil demand growth by 580,000 barrels a day, JP Morgan added.
The market turned short on crude oil once again, with its net-speculative positions declining the most since May, Singapore-based OCBC said.
The bank said U.S. oil stockpiles fell 481,000 barrels in the last two weeks, supporting oil prices, and a sustained decline in inventory levels will provide further support.
According to five analysts surveyed by Dow Jones Newswires, U.S. crude-oil inventories fell by 400,000 barrels in the week ended Friday. The American Petroleum Institute, an industry group, will release its inventory survey at 2130 GMT.
Oil prices are also supported by tensions in the Middle East.
"Alongside Egypt, Syria, Iran and Gaza all remain latent trouble spots where the unrest could overspill into the oil production region in the Persian Gulf, where around a quarter of the world's crude oil is produced," Commerzbank said in a note.
It said oil prices "should remain well-supported, especially since financial investors are increasingly betting on climbing prices again."
Nymex reformulated gasoline blendstock for January--the benchmark gasoline contract--fell 73 points to $2.7192 a gallon, while January heating oil traded at $3.0522, 40 points lower.
ICE gasoil for December changed hands at $946.25 a metric ton, down $3.50 from Monday's settlement.
