June 17 (Bloomberg) -- Oil dropped to its lowest level in four months in New York on concern the Greek debt crisis will derail Europe’s economic recovery, curbing fuel demand.
Futures pared an earlier loss of 3 percent as German Chancellor Angela Merkel moderated earlier conditions for supporting a Greek rescue plan. Crude is down 5.2 percent this week as data showed U.S. manufacturers turned pessimistic in June and demand for diesel declined. Prices will slide further next week, according to a Bloomberg survey of analysts.
“Oil demand growth has slowed in the second quarter with a weakening of the economic recovery,” said Harry Tchilinguirian, London-based head of commodity-markets strategy at BNP Paribas SA. “The recent oil move is forex-driven. Past the current soft patch, we expect growth to pick up as we move into the fourth quarter.”
Crude for July delivery on the New York Mercantile Exchange slipped as much as $2.83 to $92.12 a barrel, the lowest since Feb. 22, and was at $94.15 at 1:02 p.m. London time. This week’s price biggest decline is the biggest in six weeks. Brent oil for August delivery dropped 35 cents, or 0.3 percent, to $113.67 a barrel on the London-based ICE Futures Europe exchange. The price is 44 percent higher the past year.
U.S. consumption of distillate fuel, which includes diesel and heating oil, tumbled 5.2 percent last week to the lowest since January, the Energy Department said on June 15.
The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7, the lowest since July 2009, from 3.9 the prior month, data on June 16 showed. Readings less than zero signal contraction. The Bloomberg gauge of economic expectations slumped to minus 31 this month, the weakest since March 2009, from minus 16.
Chancellor Angela Merkel retreated from German demands that bondholders be forced to shoulder a “substantial” share of a Greek rescue, saying she’ll work with the European Central Bank to avoid disrupting markets.
A Greek default is “almost certain” and could drive the U.S. economy into recession, said Alan Greenspan, former Federal Reserve chairman.
“The rise in risk aversion is currently putting so much pressure on oil prices,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “In the climate of a greater perception of financial market and economic risks and given the present strength of the U.S. dollar, the price correction is likely to continue.”
The Organization of Petroleum Exporting Countries will cut crude-oil loadings for the first time in seven weeks as summer demand for driving fuel in the northern hemisphere is set to pass its peak, according to tanker-tracker Oil Movements.
Producers will ship 22.81 million barrels a day in the four weeks to July 2, down 0.7 percent from the period ended June 4, the Halifax, England-based consultant said yesterday.
OPEC failed to agree on an output target when it met on June 8. Saudi Arabian Oil Minister Ali Al-Naimi pledged that day the kingdom would keep markets adequately supplied in the absence of an accord by the 12-member group.
Oil may fall next week on signals that economic growth in the U.S. and China will slow, curbing fuel use in the world’s biggest crude-consuming countries, a Bloomberg News survey showed. Eighteen of 38 analysts, or 47 percent, forecast oil will decline through June 24.
Thirteen respondents, or 34 percent, predicted prices will increase and seven estimated there will be little change. Last week, 54 percent of respondents said futures would drop.
--With assistance from Ben Sharples in Melbourne. Editors: John Buckley, Raj Rajendran
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