BLBG: Oil Snaps Five-Day Losing Streak as Decline to Near $70 Draws Investors
Crude oil traded near its lowest level in seven weeks before a U.S. government report on fuel supplies, paring earlier gains as equity markets retreated.
The U.S. Energy Department will probably report today that crude stockpiles gained 300,000 barrels last week after three weeks of declines, a Bloomberg survey showed. European stock indexes declined, led by shares of oil and gas companies.
“U.S. consumption is still very low, product inventories are sky-high,” said Tobias Merath, Zurich-based head of commodity research at Credit Suisse Group AG. “In every market we’ve seen fears of a double-dip recession and oil has been particularly affected.”
Crude for October delivery traded for $71.59 a barrel, 4 cents lower, in electronic trading on the New York Mercantile Exchange as of 12:45 p.m. London time. It earlier sank to $71.32, equaling yesterday’s seven-week intraday low, and then rose as much as 1 percent to $72.37. Brent crude for October delivery rose 10 cents to $72.48 a barrel on the London-based ICE Futures Europe Exchange.
European stocks slid, extending a one-month low, as investors awaited reports on U.S. house prices and business investment for signs of the health of the world’s largest economy. Asian shares fell and U.S. futures fluctuated.
The Energy Department will issue its weekly report at 10:30 a.m. local time in Washington D.C. today. U.S. gasoline stockpiles probably declined 450,000 barrels in the week ended Aug. 20, based on the median estimate from 18 analysts surveyed.
‘Disappointing Headlines’
Further evidence that the U.S. is sliding back into a recession will send New York oil below $70 a barrel, according to Stephen Schork, president of consultant Schork Group Inc.
“The market has declined in 13 out of the last 15 sessions and dollar volatility has dropped in accord,” Schork, based in Villanova, Pennsylvania, wrote in a report today. “At this point, all it will take is one more disappointing headline and/or dollar strength. The bears would then be in a position for a run at the lows, mid $60s, seen in May.”
Christof Ruehl, BP Plc’s chief economist, expects crude prices to remain in a range of $70 to $75 a barrel until the middle of 2011. Ruehl made his comments today at the ONS oil and gas conference in Stavanger, Norway.
The difference between oil prices for delivery next year and in five years’ time indicates that investors are pessimistic about future demand for the commodity, according to PVM Oil Associates Ltd.
While New York oil futures for delivery in December 2011 are trading at a $5 a barrel premium to those for settlement this December, the additional cost of contracts in 2015 is only $5.50, the broker said in a report today.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
