Bloomberg News

Oil Heads for Biggest Weekly Drop in Six on Europe Debt Concern

June 17, 2011

June 17 (Bloomberg) -- Oil headed for its biggest weekly decline in more than a month in New York amid concern the Greek debt crisis will threaten Europe’s economic recovery, curbing fuel demand.

Futures slipped as much as 0.8 percent, giving up earlier gains, after Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, was cited in a newspaper as saying Greece faces “an extremely difficult process.” Crude is down 4.8 percent this week after tumbling as reports showed U.S. manufacturers turned pessimistic in June and demand for diesel declined.

“We expect the recovery to be sustainable, but at the minute things look a little soft,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicted crude will average $113 a barrel in the third quarter. “Everyone is waiting to see what happens in Greece,” he said.

Crude for July delivery slipped as much as 78 cents to $94.17 a barrel in electronic trading on the New York Mercantile Exchange, and was at $94.41 at 2:15 p.m. Singapore time. The contract advanced as much as 45 cents earlier. Prices are 23 percent higher the past year.

Brent oil for August delivery dropped 67 cents, or 0.6 percent, to $113.35 a barrel on the London-based ICE Futures Europe exchange. Prices are 44 percent higher the past year.

Four-Month Low

Oil fell to its lowest in almost four months on June 15, after the Federal Reserve Bank of New York’s general economic index dropped to minus 7.8, the lowest level since November. U.S. consumption of distillate fuel, a category that includes diesel and heating oil, tumbled 5.2 percent last week to the lowest since January, the Energy Department said on the same day.

Juncker’s comments, reported in an interview in the German newspaper Tagesspiegel, sent the euro lower against the dollar, limiting the appeal of commodities priced in the U.S. currency. The euro slid to $1.4141 from $1.4204 yesterday in New York.

German Chancellor Angela Merkel and French President Nicolas Sarkozy will today discuss a rescue package for Greece, where Prime Minister George Papandreou is set to make changes to his cabinet after failing to garner opposition support for austerity measures. A Greek default is “almost certain” and could help drive the U.S. economy into recession, said Alan Greenspan, former Federal Reserve chairman.

OPEC Loadings

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 in a report 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.

--Editors: Paul Gordon, Ryan Woo.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net.


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