BLBG:Oil Declines On Speculation Debt Crisis Will Curb Demand
Oil dropped on speculation Europe’s debt woes would curb energy demand after manufacturing in the continent contracted as global policy makers discuss the region’s crisis.
West Texas Intermediate futures fell, giving up earlier gains of as much as 1.1 percent. Euro-area services and manufacturing output contracted in May, adding to signs the economy is suffering from worsening debt. Finance ministers and central bank governors from the Group of Seven countries will hold a call today on the European debt crisis, according to Canadian Finance Minister Jim Flaherty.
“Emergency talks for the G7 are a little bit dangerous because they raise expectations,” Ole Hansen, senior manager of trading advisory at Saxo Bank A/S, said by phone from Copenhagen. “Europe can go from bad to worse and China is obviously slowing. These two areas have a significant impact for general demand of most commodities, including oil.”
Crude for July delivery fell as much as 42 cents to $83.56 a barrel in electronic trading on the New York Mercantile Exchange and was at $83.70 at 9:58 a.m. London time. The contract yesterday rose for the first time in five days by 0.9 percent to $83.98. Prices are 15 percent lower this year.
Brent oil for July settlement fell as much as 1 percent to $97.87 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas was at $14.32, narrowing from $14.87 yesterday.
A composite index based on a euro-area survey of purchasing managers in both services and manufacturing dropped to 46 in May from 46.7 in April, London-based Markit Economics said today, compared with an estimate of 45.9. The indicator has remained below 50 -- indicating contraction -- for four months.
The data showed European companies are cutting back on hiring and spending as the intensifying fiscal crisis makes the economic outlook more uncertain.
To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
