Oil dropped from the highest level in four months in New York before European finance ministers meet today to discuss the region’s debt crisis and as U.S. lawmakers vote this week on budget measures. 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 outline their spending plans. Finance ministers in Brussels will assess Spain, Greece and Cyprus and debate how to enact policies they promised to subdue the region’s crisis. “In Europe, we believe things are deteriorating rapidly,� said Guy Wolf, a strategist at London-based commodities broker Marex Spectron Group Ltd. “Everyone believes the crisis has been solved. Yet politicians haven’t done anything, we have just seen markets apply less pressure.� WTI crude for February delivery, which expires tomorrow, fell as much as 51 cents to $95.05 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.07 at 9 a.m. London time. The more active March contract was down 46 cents at $95.58. Front-month futures rose 7 cents on Jan. 18 to the highest close since Sept. 17. The average volume of all contracts was 22 percent below the 100-day average. Floor trading will be closed today for Martin Luther King Jr. Day. Relative Strength Brent 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 to WTI futures for the same month. The gap was $15.16 on Jan. 17, the narrowest since July 24. WTI is falling 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. Since 1960, Congress has raised or revised the debt ceiling 79 times, including 49 times under Republican presidents, according to the Treasury Department. 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 difficulties. The EU 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. China’s commercial crude inventories at the end of December fell to the lowest level in nine months and gasoline stockpiles rose to the highest in almost two years after the nation boosted crude-processing to a record. Crude supplies, excluding emergency reserves, dropped 3.6 percent from a month earlier, a report from Xinhua news agency’s China Oil, Gas & Petrochemicals newsletter showed today. Inventories dropped to 29.15 million metric tons, the lowest since March, according to data compiled by Bloomberg. Gasoline stockpiles gained 8.5 percent to 7.02 million tons, the highest since February 2011. Net-long positions in WTI 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 Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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