By Christian Schmollinger June 2 (Bloomberg) -- Oil fell for a third day as Chinese equities dropped, highlighting concerns about flagging fuel demand in the world’s second-largest crude user, and as the euro fell against the dollar, limiting the appeal of commodities. Oil gave up earlier gains as China’s Shanghai Composite Exchange slumped to a 13-month low on concerns about banks’ abilities to raise funds. The country’s manufacturing index yesterday showed less-than-expected growth. The euro declined for a second day following reports yesterday European unemployment reached a 12-year high in April. “The market is very sensitive to any news right now,” said Clarence Chu, a trader at options dealer Hudson Capital Energy in Singapore. “The dollar and euro exchange has been very volatile so that translates to the oil price. The soft euro will impact the dollar and that will hurt China’s export sector.” Crude oil for July delivery dropped 50 cents, or 0.7 percent, to $72.08 a barrel at 12:38 p.m. Singapore time on the New York Mercantile Exchange. Prices have swung between gains of 0.5 percent and losses of as much as 1.1 percent today. Yesterday, the contract lost $1.39, or 1.9 percent, to $72.58. Futures fell 14 percent in May. The euro retreated as much as 0.3 percent today after hitting a four-year low of $1.2111 yesterday. It was at $1.2191 at 12:39 p.m. Singapore time. China’s purchasing manager’s index declined to 53.9 in May from 55.7 in the previous month. It fell short of a median 54.5 estimate from 18 economists surveyed by Bloomberg News. A gauge of manufacturing in the 16-member euro region declined to 55.8 from 57.6 the previous month, London-based Markit Economics said. Oil Supplies Brent crude oil for July settlement slipped 0.7 percent to $72.22 a barrel at 12:40 p.m. Singapore time on the London-based ICE Future Europe exchange. The contract has swung between gains of 0.5 percent and a decline of 0.8 percent today. Yesterday, it lost $1.94, or 2.6 percent, to $72.71. U.S. crude oil supplies probably fell last week for the first time since April, a Bloomberg News survey showed. Stockpiles dropped 500,000 barrels from 365.1 million barrels in the prior week, based on the median estimate of 11 analysts surveyed by Bloomberg. Oil supplies have increased in 16 of the past 17 weeks, decreasing only in the week ended April 9. Imports of crude oil rose 1 percent to 9.93 million barrels a day in the week ended The Energy Department is scheduled to release its weekly report tomorrow, a day later than usual because of the Memorial Day holiday. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net

Source