BLBG: Crude Oil Fluctuates as the Euro Climbs From a Four-Year Low
By Mark Shenk
May 19 (Bloomberg) -- Crude oil fluctuated in New York after the euro rebounded from a four-year low against the dollar as a European Union official said Germany’s ban on short-selling reinforces the need for coordinated action.
Oil dropped to a seven-month low earlier today after Germany’s prohibition sparked concern that regulation will increase. The 16-nation currency advanced after EU Economic and Monetary Affairs Commissioner Olli Rehn said that “there is strong pressure to take action against speculative attacks.” A government report showed that U.S. supplies climbed a 16th week.
“The currency market is driving the oil price,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “The fundamentals are out the window. The recent currency moves are sparking longer-term worries about whether the economic recovery is real.”
Crude oil for June delivery fell 7 cents to $69.34 a barrel at 10:55 a.m. on the New York Mercantile Exchange. Futures touched $67.90, the lowest intraday price since Sept. 30.
Brent crude oil for July settlement declined 70 cents, or 0.9 percent, to $73.73 a barrel on the London-based ICE Futures Europe exchange. The contract reached $73.21, the lowest level since Feb. 16.
German Chancellor Angela Merkel laid out proposals to gain control over “destructive” financial markets after she imposed a unilateral ban on naked short-selling that sent stocks and the euro sliding.
Short sellers borrow assets and sell them, betting the price will fall and they’ll be able to buy them later, return them to the lender and pocket the difference. In naked short- selling, traders never borrow the assets so betting is unlimited.
Four-Year Low
The euro dropped to as low as $1.2144, the weakest level since April 17, 2006, as Germany’s ban on speculative sales triggered concern that Europe’s debt crisis will worsen. The single currency traded at $1.2333 at 10:56 a.m. in New York, up 1.1 percent from $1.2202 yesterday.
“Oil is reacting to the strong rally in the euro,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “There’s a fear that there will be further government intervention in the markets.”
Supplies of crude oil rose 162,000 barrels to 362.7 million in the week ended May 14, an Energy Department report showed today. Stockpiles were forecast to increase 500,000 barrels, according to the median of 15 analyst estimates in a Bloomberg News survey.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
