Bloomberg News

Oil Falls for Second Day as Equities Drop and Supplies Increase

October 13, 2011

Oct. 13 (Bloomberg) -- Oil dropped for a second day in New York as U.S. equities declined on a decrease in JPMorgan Chase & Co.’s earnings and crude supplies increased more than forecast. Brent oil’s premium to New York futures reached a record.

Futures retreated 1.6 percent as the Standard & Poor’s 500 Index halted its biggest gain over seven days since 2009. Oil stockpiles rose 0.4 percent and gasoline inventories unexpectedly tumbled as the refinery utilization rate fell the most in a single week since February.

“The crude market is really tracking the S&P 500 and the dollar right now, and I don’t think it’s trading independently of anything,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “The crude number was a bearish one today.”

Crude for November delivery declined $1.34 to settle at $84.23 a barrel on the New York Mercantile Exchange. Prices are down 7.8 percent this year.

Brent for November settlement on the London-based ICE Futures Europe exchange dropped 25 cents, or 0.2 percent to $111.11 a barrel. The European benchmark crude was at a premium of $26.88 to the U.S. contract, breaking the record of $26.87 set on Sept. 6.

The S&P 500 fell 0.1 percent to 1,206.51 at 3:09 p.m. in New York. The Dow Jones Industrial Average slipped 0.1 percent to 11,505.23.

“It’s all about the economy,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “If the economy looks good we go up, if the economy starts to sputter we go down.”

Obama, Iran

Oil pared its intraday loss after President Barack Obama linked Iran to a foiled plan to assassinate the Saudi Arabian ambassador to the U.S.

Obama said a person charged with plotting to kill Saudi Ambassador Adel Al-Jubeir “had direct links, was paid by” and “directed by individuals in the Iranian government.” He said the U.S. would “continue to mobilize the international community” to “make sure that Iran is further isolated.” Saudi Arabia and Iran are OPEC’s top two oil producers.

Oil futures settled at a two-week high of $85.81 a barrel on Oct. 11, capping the longest rally this year, as equities and the euro rose as European officials worked to stem the sovereign-debt crisis.

Slovakia Vote

Prices pared early losses after Slovakia became the last European Union country to approve Europe’s enhanced bailout fund. Euro-area countries will probably decide within 10 days on the next aid payment for Greece and plan to avoid a “credit event,” a European Union official who spoke on condition of anonymity told reporters today in Brussels.

“Pullback in the euro and the equities are pressuring prices,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We’re not out of the woods yet on Europe and Greece, and given that, the move up to $85 seems overdone.”

The euro was little changed at $1.3796 at 3:10 p.m. in New York from $1.3791 yesterday. Earlier, it touched $1.3685. The European single currency gained 1.1 percent yesterday.

Oil supplies rose 1.34 million barrels to 337.6 million last week, more than the 800,000-barrel median estimate of 15 analysts surveyed by Bloomberg News before the Energy Department report. Refineries ran at 84.2 percent of capacity last week, down from 87.7 percent the previous week.

Gasoline Stockpiles

Gasoline stockpiles dropped 4.13 million barrels, or 1.9 percent, to 209.6 million. They were forecast to gain 250,000 barrels in the Bloomberg News survey. Distillate fuel, a category that includes heating oil and diesel, fell 2.93 million barrels, or 1.9 percent, to 154 million, more than the 500,000- barrel drop forecast in the survey.

“What happens because of that drop in utilization is we lose a lot of gasoline and a lot of distillate and build crude,” said Carl Larry, director of energy derivatives and research with Blue Ocean LLC in New York. “Overall demand was lower this week.”

Total products supplied, a measure of consumption, fell 1.9 percent to 18.7 million barrels a day last week, the lowest level since July, the department said. Gasoline demand increased 0.6 percent, the report showed.

Prices also dropped after the American Petroleum Institute said yesterday that U.S. gasoline demand slid the most in more than five years and as China’s net crude imports declined to the third-lowest level this year, the customs bureau said today.

Oil volume in electronic trading on the Nymex was 663,981 contracts as of 3:12 p.m. in New York. Volume totaled 678,063 contracts yesterday, 0.9 percent above the average of the past three months. Open interest was 1.42 million contracts.

--With assistance from Ayesha Daya in Dubai. Editors: Richard Stubbe, Dan Stets

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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