June 16 (Bloomberg) -- Oil traded near its lowest level in almost four months in New York, erasing earlier gains as European equities declined and the euro weakened against the dollar amid signs that the region’s debt crisis is worsening.
Futures slipped as stock markets fell worldwide to a three- month low, the euro weakened and European government default risk climbed to a record. Oil earlier rose as much as 1 percent after the International Energy Agency raised its oil demand forecast.
“The brief rebound earlier was unlikely to last because of concern that Europe’s debt crisis is worsening,” said Carsten Fritsch, a Commerzbank AG analyst in Frankfurt. “Weaker-than- expected data from U.S. manufacturing yesterday is also not good for the demand outlook in the world’s biggest oil consumer.”
Crude for July delivery was down 9 cents $94.72 a barrel in electronic trading on the New York Mercantile Exchange at 1:49 p.m. London time, after rising as high as $95.75. The contract yesterday fell as low as $94.01, the lowest price since Feb. 22. Brent oil for August delivery gained 44 cents to $113.45 a barrel on the London-based ICE Futures Europe exchange. It fell $6.34 yesterday to $113.01.
New York futures climbed earlier today as the IEA raised its forecast for global oil demand to 1.3 percent annually for the next five years on economic growth in China. Oil consumption will increase to 95.3 million barrels a day in 2016 from 88 million barrels a day in 2010, with China accounting for about 41 percent of the gain, the IEA said in its Medium-Term Oil Market Report today.
The agency also cautioned that gains in prices threaten the recovery. Crude prices are “weighing” on the developed nations that make up the Organization for Cooperation and Development, the Paris-based adviser to oil-consuming nations said.
The euro fell for a second day to a three-week low of $1.4074 after Het Financieele Dagblad, a Dutch newspaper, cited European Central Bank Governing Council member Nout Wellink as saying the region’s emergency fund should be doubled.
The currency was also dragged lower on concern a reshuffling of Greek Prime Minister George Papandreou’s cabinet will lead to a renegotiation of aid terms. A stronger dollar typically makes commodities less attractive as an investment.
Papandreou is seeking to win a confidence vote after violence erupted over budget cuts and austerity measures needed for international aid. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet tomorrow in Berlin, with pressure increasing for the leaders to reach an accord on a rescue package for Greece.
The MSCI All-Country World Index slid 1.3 percent. The Greek two-year note yield rose above 30 percent for the first time, according to data compiled by Bloomberg.
Oil fell yesterday as manufacturing in the New York region unexpectedly shrank in June and the Energy Department said U.S. fuel demand fell for the first time in five weeks.
The Federal Reserve Bank of New York’s general economic index dropped to minus 7.8, the lowest level since November, from 11.9 in May. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut.
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