BLBG:Oil Drops From Four-Month High Before U.S. Debt-Ceiling Talks
Oil dropped from the highest price in four months in New York before U.S. lawmakers vote this week on budget measures and European finance ministers meet today to discuss the debt crisis that threatens the region’s economy.
West Texas Intermediate futures slid as much as 0.5 percent, declining for the first time in four days. House Republicans will use the planned Jan. 23 vote on a debt-ceiling increase to try to force Senate Democrats to adopt a budget to spell out their spending plan. Finance ministers in Brussels will assess Spain, Greece and Cyprus and debate how to enact policies they promised to subdue the region’s crisis.
“Given we don’t have a lot of data, the focus will look toward how the U.S. is going to solve their debt ceiling,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “We’re not getting much of a lead out of Europe.”
WTI crude for February delivery, which expires tomorrow, fell as much as 51 cents to $95.05 a barrel and was at $95.27 at 4:06 p.m. Singapore in electronic trading on the New York Mercantile Exchange. The more active March contract was down 25 cents at $95.79. Front-month futures rose 7 cents on Jan. 18 to the highest close since Sept. 17.
The average volume of all contracts traded was 27 percent below the 100-day average. Floor trading will be closed today for Martin Luther King Jr. Day.
Relative Strength
Brent oil for March settlement on the London-based ICE Futures Europe exchange dropped as much as 38 cents, or 0.3 percent, to $111.51 a barrel. The average volume of all contracts traded was 6 percent below the 100-day average. The European benchmark crude was at a premium of $16.10 to WTI futures for the same month. The gap was $15.16 on Jan. 17, the narrowest since July 24.
WTI is decreasing as a technical indicator shows prices have climbed too quickly for further gains to be sustainable. The 14-day relative strength index was higher than 70 for a second day on Jan. 18, according to data compiled by Bloomberg. A reading above that level signals a market is overbought and will decline. The RSI is at 69 today.
The Treasury Department has said the U.S. will exceed its $16.4 trillion borrowing authority sometime from mid-February to early March. Congress faces two other fiscal deadlines in the next 90 days, and House Republicans plan to use those debates rather than the immediate one over the debt limit to push for federal spending cuts.
Stability Mechanism
Finance ministers are debating whether the 500 billion euro ($666 billion) European Stability Mechanism should take over earlier bank bailouts that were routed through governments, and what to do with so-called legacy assets. A European Union aide who briefed reporters defined those as loans already on a bank’s balance sheet that could later cause issues.
The European Union accounted for 16 percent of the world’s oil consumption in 2011, and the U.S. used 21 percent, according to BP Plc (BP/)’s Statistical Review of World Energy.
Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, shipped 7.15 million barrels a day of oil in November, down 1.7 percent from October, as it reduced monthly output by 2.4 percent to 9.49 million barrels a day, the Joint Organizations Data Initiative said on its website. Iraq, OPEC’s second-biggest oil producer, cut its exports by 3.3 percent to 2.62 million barrels a day even as it pumped 1.7 percent more crude. Angola, the United Arab Emirates, Qatar, Ecuador and Venezuela also reduced exports, the data showed.
Algerian Shipments
Algeria’s shipments surged 42 percent to 725,000 barrels a day while its production fell 2.7 percent, the data showed. JODI, supervised by the Riyadh-based International Energy Forum, uses statistics supplied by national governments to compile data on production, imports and exports for oil-producing and consuming nations. Kuwait, Iran, Nigeria and Libya didn’t submit data for the month.
Net-long positions in West Texas Intermediate oil held by money managers, including hedge funds, commodity pools and commodity-trading advisers, jumped by 11,183 futures and options combined, or 6.7 percent, to 179,249, according to the Commodity Futures Trading Commission’s Jan. 18 Commitments of Traders report. Bullish gasoline wagers were cut by 2,067 futures and options combined, or 2.8 percent, to 73,093.
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
