BLBG: Oil Set for Biggest Weekly Drop Since January on Demand Concern
July 10 (Bloomberg) -- Crude oil fell, heading for its biggest weekly decline since January, on concern a prolonged global recession will sap energy demand and as a stronger dollar cut demand for commodities a currency hedge.
Oil fell to a seven-week low on speculation fuel consumption in the U.S., the biggest energy-using nation, will remain subdued. Stockpiles in industrialized countries rose to 2.77 billion barrels in May, about 7 percent more than last year’s level, the International Energy Agency said today in its monthly report.
“There is a clear understanding that there is too much spare capacity on the supply side,” Sergei Glaser, an analyst at Vostok Nafta Investment Ltd, a Stockholm-based fund management company, said by phone today from London.
Crude oil for August delivery fell as much as $1.63, or 2.7 percent, to $58.78 a barrel on the New York Mercantile Exchange, and was at $58.88 at 1:27 p.m. London time. Prices have fallen 20 percent since reaching a year-to-date high of $73.38 a barrel on June 30.
The dollar rose to as high as $1.4030 against the euro from $1.3879 earlier. A stronger dollar cuts the lure of commodities as a hedge against inflation and depreciating U.S. currency.
Worldwide consumption of crude oil will increase by 1.4 million barrels a day, or 1.7 percent, to 85.2 million barrels a day next year, the IEA said in its first monthly report to issue a forecast for 2010.
Brent crude for August settlement on London’s ICE Futures Europe exchange fell as much as $1.43, or 2.3 percent, to $59.67 a barrel.
U.S. Regulators
U.S. regulators said July 7 they may clamp down on oil and gas price speculators by limiting the holdings of energy futures traders, including index and exchange-traded funds.
“This news was like a bucket of cold water for the market,” Glaser said.
Oil may fall next week on speculation the global recession and payroll cuts will constrain demand and keep U.S. supplies ample, a Bloomberg News survey of analysts showed.
Nineteen of 41 analysts surveyed, or 46 percent, said futures will decline. Nine expect the market will be little changed and 13 forecast that oil prices will rise.
“With a poor economic outlook for the future, oil is going to be pressured to come down in price,” said Mike Sander, an investment adviser with Sander Capital in Seattle. “Just as exuberance pushed oil higher in the second quarter, pessimism could easily push oil lower in the third quarter.”
