BLBG:Crude Declines for Fifth Day on Saudi Comments, Weaker Euro
Oil fell for a fifth day as Saudi Arabian Oil Minister Ali al-Naimi said prices should come down and the euro weakened against the dollar after election results in Greece and France.
Oil slipped to a three-month low as al-Naimi said prices are “still a little bit high” and that Saudi Arabia is storing crude. The euro fell for a seventh day as Greek politicians struggled to form a new government and on the possibility of a policy conflict between Germany and France, which elected Socialist Francois Hollande president.
“The Saudis are still coming out and saying prices are too high, and they probably will continue to ramp up production,” said Phil Streible, a Chicago-based commodities broker at RJO Futures. “The euro is getting everything down.”
Crude for June delivery fell 93 cents, or 0.9 percent, to settle at $97.01 a barrel on the New York Mercantile Exchange. The price has fallen 8.6 percent in a five-day losing streak, the longest since Feb. 2.
Prices slid 68 cents, or 0.7 percent, to $97.26 a barrel in electronic trading at 4:33 p.m. after the industry-funded American Petroleum Institute reported oil inventories increased 7.78 million barrels to 378.2 million in the week ended May 4. Oil traded at $97.47 before the report was released at 4:30.
Brent oil for June settlement dropped 43 cents, or 0.4 percent, to $112.73 a barrel on the London-based ICE Futures Europe exchange.
Biggest Producer
Saudi Arabia, the world’s biggest crude exporter, is storing as much as 80 million barrels and has 2.5 million barrels a day of spare capacity, al-Naimi said before board meetings of the Saudi Arabian Oil Co., of which he is chairman. The country has set aside supplies “on shore in Saudi Arabia, in pipelines, in tanks,” he said.
The kingdom, the biggest producer in the Organization of Petroleum Exporting Countries, pumped 9.82 million barrels a day of oil in April, according to Bloomberg estimates. That’s the highest level since August 2011.
“Saudi Arabia has indicated that a lot of its oil is going into storage,” said Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy. “But they will eventually release some of it.”
The 17-nation euro extended its longest run of declines against the greenback since September 2008 as German Chancellor Angela Merkel invited Hollande to Berlin for talks “as soon as possible.” Hollande will meet Merkel soon after his May 15 inauguration, said his campaign chief, Pierre Moscovici. Hollande has called for watering down a European Union accord that Merkel pushed to cut debt.
Demand Impact
“The conclusion has been drawn that the economic and financial cohesion in the continent has a great possibility of crumbling, and that will have an impact on oil demand,” said Mike Fitzpatrick, editor of the Energy Overview newsletter in New York and previously an oil trader at MF Global. “The sentiment from OPEC is for lower prices.”
The euro declined 0.2 percent against the dollar. A weaker euro and stronger dollar reduce oil’s appeal as an investment.
“Oil’s definitely attached to currencies,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
Greece’s New Democracy leader, Antonis Samaras, said yesterday he wasn’t able to forge agreement to form a government after the elections. The attempt will pass to Alexis Tsipras, the head of Syriza, the second-biggest party, which has vowed to cancel bailout terms for the nation.
‘Market Apprehension’
The elections have brought “market apprehension,” Tchilinguirian said. “More worrying is the development in Greece.”
Greece now faces a 50 percent to 75 percent likelihood of leaving the euro in the next 18 months, Citigroup Inc. economists Guillaume Menuet and Juergen Michels wrote yesterday. Their previous estimate was 50 percent.
Crude also moved lower with equities. The Standard & Poor’s 500 Index fell 0.4 percent and the Dow Jones Industrial Average dropped 0.6 percent.
The 14-day relative strength index of front-month futures was at 31.58. A reading below 30 signals prices have fallen too far and further losses may not last.
U.S. oil stockpiles probably advanced 2 million barrels, or 0.5 percent, to 377.9 million in the seven days ended May 4, according to the median of 12 analyst estimates before an Energy Department report tomorrow. Inventories would rise to the most since September 1990 and the string of gains would be the longest since April 2010.
The Energy Department is scheduled to release its weekly data at 10:30 a.m. tomorrow in Washington. The industry-funded American Petroleum Institute will report its own data today.
Electronic trading volume on the Nymex was 587,208 contracts as of 4:39 p.m. in New York. Volume totaled 594,512 contracts yesterday, 4.3 percent below the three-month average. Open interest was 1.6 million.
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
