BLBG:Oil Drops From Two-Month High as U.S. Budget Talks Deteriorate
Oil fell from the highest level in two months in New York on speculation its four-day gain was exaggerated as budget negotiations faltered in the U.S., threatening the economy of the world’s biggest crude user.
West Texas Intermediate futures slid as much as 0.5 percent, snapping the longest winning streak since September. Officials from President Barack Obama’s administration told leaders of business and financial services groups that talks with House Speaker John Boehner have deteriorated in the past 24 hours, a person familiar with the meeting said. U.S. oil inventories last week were 15 percent above the five-year average, a report from the Energy Department showed.
“Oil’s had a big rally over the past few days, but looks like it’s losing steam,” said Victor Shum, the managing director at IHS Consulting in Singapore who predicts New York crude has technical resistance at $90 a barrel. “If one looks beyond the near-term bullishness, we have a market that is well supplied.”
Crude for February delivery slid as much as 45 cents to $89.53 a barrel and was at $89.66 in electronic trading on the New York Mercantile Exchange at 12:26 p.m. Singapore time. The January contract, which expired yesterday, rose $1.58 to $89.51, the highest settlement since Oct. 19. The volume traded for all futures today was about 8 percent below the 100-day average.
Brent for February settlement slipped 27 cents to $110.09 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $20.43 to WTI, compared with $20.38 yesterday.
Bollinger Band
WTI has fallen 9.3 percent in 2012 as the U.S. shale boom deepened the glut at Cushing, Oklahoma, America’s biggest storage hub and the delivery point for Nymex futures. That has left it at an average discount of $17.43 a barrel to Brent this year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, has risen 2.5 percent this year.
Oil is dropping in New York after reaching technical resistance along the upper Bollinger Band, according to data compiled by Bloomberg. Futures halted rallies from mid-July to mid-September and in early December near this indicator, around $89.76 a barrel today. Sell orders tend to be clustered near chart-resistance levels.
More than $600 billion in spending cuts and tax increases are set to start in the U.S. in January unless an agreement to avert the measures is reached. President Obama would veto Boehner’s budget proposal as it would put “too big a burden on the middle class,” according to White House Communications Director Dan Pfeiffer.
Crude Stockpiles
“If we get some bad news on that front, news of a further deadlock, then we could see a reaction in oil prices,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney.
Oil climbed 1.8 percent yesterday after the Energy Department report showed refinery rates last week rose to the highest level in four months. Plants operated at an average 91.5 percent of their capacity, up 1.1 percentage points from the previous week and the most since the period ended Aug. 10. The rate was projected to remain unchanged at 90.4, according to the median estimate in a Bloomberg News survey of 11 analysts.
Crude stockpiles dropped 964,000 barrels to 371.6 million, the department said. They were forecast to decline by 1.75 million, according to the survey. Inventories are 48 million barrels above the year-ago level and the average of the past five years, according to data compiled by Bloomberg. Supplies at Cushing climbed by 145,000 barrels to 47 million, the highest level since the seven days ended June 29.
Gasoline stockpiles rose 2.2 million barrels, compared with a predicted gain of 2 million. Distillates, a category that includes heating oil and diesel, fell 1.1 million barrels, versus an increase of 1 million in the survey.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
