BLBG:Oil Drops A Second Day As Europe Crisis Threatens Demand
Oil was little changed in New York after a storm avoided the Gulf of Mexico’s energy-producing area and speculation European leaders will fail to stem its debt crisis that threatens to curb fuel demand.
Futures traded below $80 a barrel for a fourth day, near an eight-month low, after Tropical Storm Debby was forecast to bypass the western Gulf and oil companies began returning workers to platforms. Germany’s Chancellor Angela Merkel hardened her resistance to sharing euro-area debt, while HSBC Holdings Plc cut its growth forecast for China, the world’s second-biggest crude user. A government report tomorrow may show U.S. gasoline stockpiles rose for the third time in four weeks.
“Market sentiment remains negative, focusing on slow demand and ample supply,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “The supply risk that supported oil is fading as production resumes in the Gulf of Mexico. The looming European Union embargo on Iranian oil may support Brent as it is also affecting oil flows to other nations.”
Oil for August delivery fell as much as 50 cents to $78.71 a barrel in electronic trading on the New York Mercantile Exchange and was at $79.22 as of 10:40 a.m. in London. 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 Gains
Brent crude for August settlement rose 70 cents to $91.71 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $12.44, compared with $11.80 yesterday.
Tropical Storm Debby may flood parts of Florida’s panhandle and northern regions over the next two days, the National Hurricane Center in Miami said yesterday. Weather forecasters initially said there was a chance the storm would pass through the heart of the U.S. Gulf’s energy-producing area, home to 29 percent of oil production and 40 percent of refinery capacity. As of 12:30 p.m. New York time yesterday, 189 manned production platforms in the Gulf, or 32 percent, had been evacuated, said the Bureau of Safety and Environmental Enforcement.
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 Investors Service cut its ratings of 28 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.
Chinese Growth
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 forecast to 7.8 percent from 8.1 percent in a report dated June 22, citing weaker demand for exports to Europe.
“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.
The EU ban on Iranian oil imports means 95 percent of the world’s tankers may lose insurance if they carry cargo from the Gulf state as they’re covered by the 13 members of the London- based International Group of P&I Clubs. South Korea, which imports all of its crude, may halt purchases from the Gulf state after it failed to win an exemption from EU sanctions that mean tankers shipping the oil can’t get insurance.
Iran Exports
Iran’s oil exports may fall as much as 30 percent “gradually” after sanctions start July 1, Ahmed Ghalebani, managing director at National Iranian Oil Co., said at a conference in Moscow today.
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.
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.
To contact the reporter on this story: Ayesha Daya in Dubai at adaya1@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
