BLBG:Oil Declines Most in Two Weeks as U.S. House Delays Budget Vote
Oil declined the most in more than two weeks on concern U.S. lawmakers may fail to avert spending cuts and tax increases that threaten the economy of the world’s biggest crude consumer.
Futures dropped as much as 1.3 percent, paring a second weekly gain, after House Republican leaders canceled a vote on Speaker John Boehner’s budget plan and the chamber said no more votes will be held until after the Christmas holiday. Fewer than two weeks remain to avoid measures known as the fiscal cliff that start in January. Oil rose a fifth day yesterday, the longest rally since September, after government data showed U.S. gross domestic product grew at a 3.1 percent annual rate in the third quarter, higher than a previous estimate of 2.7 percent.
“The fiscal cliff is the key driver,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The GDP figure helped to create a bit of confidence and perhaps caused some upward adjustments to growth forecasts. A lot of this depends, of course, on the fiscal cliff and the extent to which the government sector is going to be a drag on the economy.”
Crude for February delivery fell as much as $1.20 to $88.93 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.14 at 12:43 p.m. Singapore time. The contract climbed 15 cents to $90.13 yesterday, the highest close since Oct. 18. Prices are up 2.8 percent this week, the most since September. The volume for all WTI futures today was almost double the 100-day average.
Brent oil for February settlement on the London-based ICE Futures Europe exchange slid as much as 81 cents, or 0.7 percent, to $109.39 a barrel. The European benchmark crude was at a $20.39 premium to New York-traded West Texas Intermediate, from $20.07 yesterday. The volume traded for all Brent futures today was about 37 percent higher than the 100-day average.
Brent-WTI Spread
WTI has dropped 10 percent in 2012 as the U.S. shale boom deepens the glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York futures. That has left it at an average discount of $17.44 a barrel to Brent this year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, has climbed 2 percent this year.
More than $600 billion in spending cuts and tax increases are set to start in the U.S. next month unless an agreement to avert the measures is reached. The Congressional Budget Office has said that a failure to avert the fiscal cliff would probably lead to a recession in the first half of 2013.
Bollinger Band
Crude is falling in New York as a technical indicator shows futures have risen too quickly for further gains to be sustainable. On the daily chart, crude settled above its upper Bollinger Band yesterday for the first time since mid-September. This indicator is at $90 a barrel today. Investors typically sell contracts when the market is overbought.
Oil may advance next week as stronger demand for fuels reduces inventories, a Bloomberg survey showed. Twelve of 31 analysts and traders, or 39 percent, forecast crude will rise through Dec. 28. Eleven respondents, or 36 percent, predicted a decrease and eight forecast little change. Last week, 39 percent of those surveyed projected a decline.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
