BLBG:Crude Heads for Biggest Weekly Decline Since May, Wiping Out Year’s Gain
Oil fell in New York, heading for the biggest weekly decline in three months and wiping out its gain for the year, on speculation fuel demand will falter as the U.S. economy weakens and the European debt crisis worsens.
Futures dropped as much as 1.6 percent after slumping 5.8 percent yesterday. U.S. consumer confidence slid to the lowest in more than two months. Italian and Spanish bonds surged to records after European Central Bank debt purchases failed to reassure investors that officials will solve the region’s fiscal crisis. Labor Department data today may show the U.S. didn’t create enough jobs in July to reduce unemployment. Oil extended declines after falling below technical support levels.
“The market is nervous, people are panicking,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts oil in New York will average $100 a barrel this year. “Everyone is liquidating and moving into cash and that’s understandable because every other commodity market is under pressure.”
Crude for September delivery dropped as much as $1.40 to $85.23 a barrel in electronic trading on the New York Mercantile Exchange, and was at $85.95 at 1:15 p.m. Sydney time. The contract yesterday tumbled $5.30 to $86.63, the lowest settlement since Feb. 18. Prices are down 10 percent for the week and 6 percent in 2011.
Brent oil for September settlement rose 19 cents to $107.44 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a $21.45 premium to U.S. futures, compared with a record close of $22.67 on Aug. 2.
Below Technical Support
Crude fell below long-term technical support at $89.84 a barrel, according to data compiled by Bloomberg. That’s the 50 percent Fibonacci retracement of the drop from a record $147.27 in July 2008 to $32.40 in December the same year.
Futures may halt their decline today close to $85.20, the bottom of a downward-sloping channel that started in May. Oil’s relative strength index slid below 30, signaling prices have fallen too quickly. The reading was 26 today, the lowest since May 2010.
“I want to see if the $85 a barrel level holds for WTI and $107 for Brent crude, whether it will be solid or not,” said Ken Hasegawa, a commodity-derivatives sales manager at broker Newedge Group in Tokyo, who estimates that futures may decrease to $83.90 in New York and $102.30 in London if prices break below those marks.
Stocks, Economy
Oil in New York may decline to as low as $83.85 a barrel, a low set in February, based on technical analysis by Forecast Ltd. in a note e-mailed today. Support levels are also at $79.25 and $70.76, the note said.
Asian stocks fell the most since March. The MSCI Asia Pacific Index dropped 3.5 percent at 12:15 p.m. in Tokyo, heading for its largest weekly decline since October 2008. The Standard & Poor’s 500 decreased 4.8 percent to an eight-month low of 1,200.07 at the 4 p.m. close in New York yesterday.
The Bloomberg Consumer Comfort Index was minus 47.6 in the week to July 31, the lowest since May, compared with minus 46.8 the prior period. Confidence among women fell to the lowest level since October 2009, while Americans making more than $100,000 a year were the most pessimistic since November 2009.
“Economic worries in the U.S. led to fears that oil demand will soften dramatically,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in an e-mailed note today. “Traders were buffeted by fears that the global economy is slowing, nations are embracing austerity and the euro-zone debt crisis is spreading.”
‘Jittery’ Markets
A Labor Department report today may show that U.S. payrolls rose by 85,000 workers after an 18,000 increase in June that was the smallest this year, according to the median forecast of 88 economists surveyed by Bloomberg News.
“All eyes will be on tonight’s July non-farm payrolls release,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. The bank estimates oil in New York will average $100 a barrel in the third quarter. Oil fell yesterday “as markets were jittery over Europe’s worsening debt crisis and recently weak U.S. data,” he said.
Tropical Storm Emily was broken up by the 10,000-foot (3,000-meter) mountains in Haiti and the Dominican Republic and storm warnings throughout the Caribbean were dropped. Emily’s maximum winds have fallen to 35 miles (56 kilometers) per hour, below the threshold of 39 mph used to designate a system as a tropical storm, according to the National Hurricane Center.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
