BLBG:Oil Drops A Second Day As Europe Crisis Threatens Demand
Oil fell for a second day in New York amid speculation a meeting of European leaders this week will fail to halt a debt crisis that threatens to slow the economy and curb fuel demand.
Futures slid as much as 0.5 percent to trade below $80 a barrel for a fourth day. Germany’s Chancellor Angela Merkel hardened her resistance to sharing euro-area debt to resolve the region’s financial crisis, while Moody’s Investors Service cut the ratings of 28 Spanish banks. HSBC Holdings Plc reduced its economic growth forecast for China, the world’s second-biggest crude user. A government report tomorrow may show U.S. gasoline stockpiles increased for the third time in four weeks.
“The markets are really positioning themselves for the likelihood that we won’t see anything come out of the summit that makes a meaningful change to the balance of risk in Europe,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said in a telephone interview today.
Oil for August delivery fell as much as 36 cents to $78.85 a barrel in electronic trading on the New York Mercantile Exchange and was at $78.96 at 1:59 p.m. Singapore time. The contract yesterday slipped 55 cents to $79.21, the lowest close since June 21. Prices have fallen 23 percent this quarter, the biggest drop since the final three months of 2008.
Brent oil for August settlement slid 19 cents to $90.82 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $11.86, compared with $11.80 yesterday.
Merkel Rejects
Germany rejects the idea of joint liability for European debt, Merkel said at a conference in Berlin yesterday, as Spain announced it would formally seek aid for its banks. Moody’s cut its ratings on Spanish lenders because of the country’s sovereign-debt burden and souring real-estate loans, the agency said in a statement. European Union leaders start a two-day summit in Brussels on June 28.
HSBC reduced its 2012 growth estimate for China to 8.4 percent from 8.6 percent, economists Qu Hongbin and Frederic Neumann said in a note today. Citigroup Inc. lowered its growth estimate for the nation to 7.8 percent from 8.1 percent in a report dated June 22, citing weaker demand for exports to Europe.
U.S. gasoline stockpiles probably rose 1 million barrels last week, according to the median estimate of eight analysts in a Bloomberg News survey before tomorrow’s Energy Department report. Distillate inventories, a category that includes heating oil and diesel, probably increased 1.1 million barrels, while crude stockpiles declined 600,000 barrels, the survey showed.
Pump Prices
The American Petroleum Institute will release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Retail gasoline in the U.S. dropped by the most in 13 months this week, according to the Energy Department. The average price for regular gasoline fell 9.6 cents, or 2.7 percent, to $3.437 a gallon from a week earlier, the largest weekly decline since May 23, 2011, a report posted on the department’s website yesterday showed.
Oil stayed below $80 a barrel even Tropical Storm Debby halted about 44 percent of U.S. crude production and 35 percent of natural gas output from the Gulf of Mexico, according to a Bureau of Safety and Environmental Enforcement report yesterday.
The storm had top winds of 45 miles (72 kilometers) per hour and was about 90 miles west of Cedar Key, Florida, moving eastward at 4 mph, an advisory from the National Hurricane Center before 2 a.m. New York time showed.
OPEC Production
Some Persian Gulf members of OPEC may trim exports if Brent crude stays within a range of $80 to $90 a barrel, Daniel Yergin, a Pulitzer Prize-winning author and the chairman of IHS Cambridge Energy Research Associates, said in a June 23 interview at the St. Petersburg International Forum in Russia.
The Organization of Petroleum Exporting Countries kept its official production ceiling at 30 million barrels a day at a June 14 meeting in Vienna. Brent has fallen about 6 percent since then.
“We are getting down towards the lower end of what I think a lot of people could see as the sort of target range for OPEC,” Spooner said. “They are a swing producer and they do have the capacity to take production off the market to defend price levels.”
Saudi Arabia, OPEC’s biggest producer, won’t reduce output in the coming three months even if oil prices continue to drop, Asharq al-Awsat newspaper reported yesterday, citing unidentified people with knowledge of the country’s plans.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Jacob Adelman in Tokyo at jadelman1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
