Bloomberg News

Oil Drops From Six-Week High on Europe Crisis, Slowdown in U.S.

September 14, 2011

Sept. 14 (Bloomberg) -- Oil declined from a six-week high on concern that Europe’s debt crisis and the faltering U.S. economic recovery will temper fuel demand.

Futures fell as much as 1.9 percent after technical indicators signaled gains of more than 3 percent in the past two days may have been excessive. The European Central Bank said it will lend two euro-area banks dollars tomorrow, a sign they are having difficulties with borrowing. Retail sales in the U.S. unexpectedly stagnated in August, data from the Commerce Department showed. The Energy Department may say U.S. crude stockpiles fell last week, according to a Bloomberg survey.

“The euro sovereign debt crisis continues to develop,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, who predicts Brent will average $107 in the fourth quarter. “Whether speculators re-balance their portfolios with oil as a safe haven, or the focus will be on fear of lower economic activity, remains to be seen.”

Crude for October delivery declined as much as $1.68 to $88.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $89.52 at 1:42 p.m. London time. The contract yesterday rose $2.02 to $90.21, the highest since Aug. 3. Futures have lost 2 percent so far this year.

Brent oil for October settlement on the London-based ICE Futures Europe exchange was up 47 cents at $112.36 after falling as much as 79 cents to $111.10 a barrel. The European benchmark contract was at a premium of $22.67 to U.S. futures, down from a record close of $26.66 on Sept. 6.

Technical Indicators

The unchanged reading for retail sales followed a 0.3 percent gain for July that was smaller than previously estimated, Commerce Department figures showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg News was a 0.2 percent rise.

New York oil’s five-day stochastic oscillators climbed above 80, signaling prices have increased too quickly, according to data compiled by Bloomberg. Futures also stopped advancing yesterday before the 50-day moving average, at $90.70 a barrel today. A failure to breach technical resistance often means prices will change direction.

The International Energy Agency yesterday cut global oil- consumption forecasts for this year and 2012. The Paris-based IEA reduced its estimate for oil demand this year by 200,000 barrels a day and by 400,000 in 2012. Worldwide consumption will rise 1.2 percent to 89.3 million barrels a day this year and 1.6 percent to 90.7 million in 2012. A full resumption of exports from Libya following the ouster of Muammar Qaddafi will be “long and difficult,” said the energy-security adviser to developed nations.

U.S. Stockpiles

U.S. Treasury Secretary Timothy F. Geithner will meet European Union finance ministers in Wroclaw, Poland, on Sept. 16 and Sept. 17 to discuss efforts to contain the region’s sovereign-debt troubles, according to a euro-area official who spoke on condition of anonymity. It will be the first time he attends a session of Europe’s Economic and Financial Affairs Council, known as Ecofin.

“The market will focus on developments in the euro zone, ongoing weakness in economic data, and the restart of production in Libya,” Tom Pawlicki, a Chicago-based analyst at MF Global Holdings Ltd., said in a note.

Gasoline inventories rose 2.76 million barrels in the week ended Sept. 9, the industry-funded American Petroleum Institute said yesterday. A median decline of 500,000 barrels was forecast by 14 analysts in a Bloomberg News poll before an Energy Department report today.

Crude stockpiles fell 5.05 million barrels, the API said. The Energy Department report was forecast to show supplies dropped 3 million barrels after Tropical Storm Lee shut output in the Gulf of Mexico, based on the Bloomberg News survey.

--With assistance from Yee Kai Pin in Singapore. Editors: John Buckley, Raj Rajendran

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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