BS: Oil Tumbles on Concern European Debt Crisis Is Deepening
Oil plunged on concern that Europe’s sovereign-debt crisis is deepening and as a Chinese central-bank adviser said the country’s economic expansion may slow further.
Futures fell as much as 4.2 percent as the cost of insuring Spanish debt surged to a record. Greece’s creditors will meet this week amid doubts that the nation will meet its bailout targets. Growth in China, the second-biggest crude consuming country, may cool for a seventh straight quarter, said Song Guoqing, a member of the People’s Bank of China monetary policy committee.
“Worries about the European debt crisis are overshadowing everything else,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The prospect of a deflationary spiral is back haunting us, especially given the signs of a Chinese slowdown. This is bad for the outlook for commodity demand, especially oil.”
Crude oil for September delivery fell $3.81, or 4.1 percent, to $88.02 a barrel at 9:45 a.m. on the New York Mercantile Exchange. Futures dropped as much as $3.89 to $87.94. Prices are down 11 percent this year.
Brent oil for September settlement declined $4.12, or 3.9 percent, to $102.71 a barrel on the London-based ICE Futures Europe exchange.
Spain and Italy moved to ban short-selling of stocks as prices decreased. The euro dropped as much as 0.7 percent to $1.2067 today, the lowest level since June 2010. The Standard & Poor’s GSCI Index of 24 commodities decreased 3.2 percent.
‘Continuing Saga’
Catalonia, Castilla-La-Mancha, Murcia, the Canary Islands, the Balearic Islands are among the Spanish regions that have said they may ask for aid from the central government after Valencia sought a bailout last week, El Pais reported. The Catalan regional government is trying to negotiate a bridge loan with undisclosed financial entities, the newspaper said.
“The continuing saga of the euro, and in particular the travails of Spain and fears that this will soon be played out in France and Italy, is driving today’s selloff,” said Christopher Bellew, senior broker at Jefferies Bache Ltd. in London, who predicts further price losses may be limited.
German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. The European Commission, the European Central Bank and the International Monetary Fund will meet in Athens to determine the fiscal position of Greece, which has been struggling to hold to obligations tied to 240 billion euros ($290.2 billion) of rescue funds over the past two years.
Greek Disbursement
The IMF, which indicated in March it won’t commit more money to Greece, will make a decision on its next disbursement in late August at the earliest based on the findings, two fund officials familiar with the situation said in recent days.
Economic growth in China may slow to 7.4 percent this quarter, Song Guoqing said. Gross domestic product expanded 7.6 percent in the three months ended in June, the sixth quarterly deceleration and the weakest pace in more than three years. Song made the comments at a forum in Beijing on July 21.
Hedge funds increased net-long wagers on West Texas Intermediate crude, the grade traded in New York, by 4 percent in the seven days ended July 17 to 133,165 contracts, according to the U.S. Commodity Futures Trading Commission’s weekly report on July 20.
In London, hedge funds and other money managers bolstered bullish bets on Brent oil by 18,678 contracts, or 31 percent, in the week ended July 17, data from ICE Futures Europe showed.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
