Crude oil fell to a four-week low as fuel demand from China slowed and Standard & Poor’s cut Greece’s credit rating to the lowest level held by a country. Oil dropped 2 percent as government data showed China’s oil-product consumption fell 4 percent in May and S&P cut Greece to CCC. The spread between New York-traded WTI crude and London’s Brent widened to $21.80 a barrel as supply disruptions in the North Sea and Libya bolstered demand for the European grade. “Economic weakness is still the forefront of the market now,” said Carl Larry, director of energy derivatives and research with Blue Ocean Brokerage LLC in New York. “Oil also moved down because of the downgrade.” Crude for July delivery fell $1.99 to $97.30 a barrel on the New York Mercantile Exchange, the lowest settlement since May 17. Futures are up 32 percent in the past year. Brent oil for July delivery gained 32 cents, or 0.3 percent, to $119.10 a barrel on the London-based ICE Futures Europe exchange. The European crude was $6.06 more expensive on average over the past year. China’s National Development and Reform Commission said the country’s daily consumption of fuels dropped to 650,000 metric tons in May. China is the world’s second-largest oil consumer after the U.S. Product Supplies Oil-product inventories rebounded “slightly” as of the end of May from April and rose 1 million tons from a year earlier, the NDRC said, without giving exact figures. “Where is the demand?” said Richard Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago. “I don’t think we have a rosy, good picture for the world economy.” S&P said in a statement that “there is a significantly higher likelihood of one or more defaults” in Greece. The downgrade follows Moody’s Investors Service’s decision this month to grade Greece only one level higher and may intensify pressure on European governments to stem the region’s sovereign-debt crisis. “The S&P downgrade of Greece sent a shudder through the markets,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Investors are selling off futures and moving to cash.” Buzzard Field Brent climbed as high as $120.25 earlier as maintenance curbed the flow from the Buzzard field off the British coast and as a rebellion against Libyan leader Muammar Qaddafi cut the country’s oil output by almost 90 percent. The gain was “because of the loss of Libyan oil and concerns about the quality of the additional Saudi barrels,” said Phil Flynn, vice president of research at PFGBest in Chicago. “All of the fear premium is in Brent. Here we have plenty of supply and weak demand.” The premium of Brent oil over U.S. futures has widened to a point that can’t be explained by market conditions, making it too risky to trade, according to consultants Petromatrix GmbH in Zug, Switzerland. Equipment problems and planned maintenance are expected to curb production at Buzzard until the end of July, according to Calgary-based Nexen Inc., the operator of the field. Libyan rebel forces said they captured the city of Sabha, in the nation’s southwest, from Qaddafi’s troops. The Libyan revolt, which began in February, has reduced the availability of light, sweet crude, or oil with low density and sulfur content. Cushing Supply Oil supplies at Cushing, Oklahoma, the delivery point for the New York-traded West Texas Intermediate grade, rose to 41.9 million barrels in the week ended April 8, the highest level since at least 2004, when the Energy Department began tracking stockpiles at the hub. Inventories fell 1.02 million barrels to 38.9 million in the week ended June 3, the department said. “WTI has become a false marker,” said Stephen Schork, president of the Villanova, Pennsylvania-based Schork Group Inc. “Supplies are flush in the U.S. Brent is more of an indicator of global supply and demand fundamentals.” Royal Dutch Shell Plc’s Nigerian unit has declared force majeure on Bonny Light oil loadings for this month and July because of multiple fires on the Trans Niger pipeline, the company said in an e-mailed statement. Shell originally planned to ship 243,333 barrels a day of Bonny Light in June and 204,839 barrels a day next month, according to loading programs obtained by Bloomberg News. Force Majeure Force majeure is a legal clause allowing companies to miss deliveries because of circumstances beyond their control. Nigeria is the fifth-largest oil exporter to the U.S., shipping 840,000 barrels a day of crude in March, according to the Energy Department. Hedge funds and other large speculators reduced wagers on rising oil prices oil by 15 percent to 190,974 in the week ended June 7, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Oil volume in electronic trading on the Nymex was 673,735 contracts as of 2:49 p.m. in New York. Volume totaled 816,977 on June 10, 24 percent above the average of the past three months. Open interest was 1.55 million contracts. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Moming Zhou in New York at Mzhou29@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Source