Bloomberg News

Oil Drops From One-Week High on Europe Bank Concern, U.S. Supply

November 29, 2011

Nov. 29 (Bloomberg) -- Oil dropped from the highest close in more than a week after Moody’s Investors Service said it may lower credit ratings for European banks, while analysts forecast that U.S. crude and gasoline stockpiles increased.

Futures slipped as much as 1 percent, the first decline in three days, after failing to settle above $100 a barrel yesterday. A U.S. Energy Department report tomorrow will probably show oil inventories rose for the first time in a month, while gasoline supplies climbed for a third week, according to a Bloomberg News survey. Moody’s Investors Service said in a statement it’s considering cuts to the ratings of banks in 15 European nations.

“The euphoria has been taken out of the market,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt who forecasts that Brent, the oil benchmark in London, will end the year at about $100 a barrel. “Bullish factors like geopolitics and the recent decline in U.S. inventories are being offset by bearish factors like growth worries and debt concerns.”

Futures for January delivery fell as much as 98 cents to $97.23 a barrel in electronic trading on the New York Mercantile and were at $97.96 at 9:49 a.m. London time. The contract rallied as much as 4.1 percent to $100.74 yesterday on signs of economic recovery in the U.S. and possible supply disruptions in the Middle East, before closing at $98.21, the highest settlement since Nov. 17.

Brent oil for January settlement was at $108.95 a barrel, down 5 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $10.99, compared with $10.79 yesterday and a record $27.88 on Oct. 14.

Technical Resistance

West Texas Intermediate crude will struggle to remain above $100 a barrel, according to a Commerzbank AG report yesterday. Futures are unlikely to advance much further after an “emphatic rejection” from $103.39, the intraday high on May 31, said London-based technical analyst Karen Jones, who earlier this month correctly forecast that Brent oil would fall below $110. WTI rose as high as $103.37 on Nov. 17 before ending the day below $99 a barrel.

U.S. crude inventories probably climbed 1 million barrels last week, according to the median of seven analyst estimates in a Bloomberg News survey. Gasoline supplies may have increased 1.1 million barrels, the survey showed. The Energy Department is scheduled to release its report tomorrow in Washington.

The American Petroleum Institute will release its inventory report today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

OPEC Quotas

The Organization of Petroleum Exporting Countries may keep oil production quotas at current levels when it meets next month, Ecuador’s Non-Renewable Natural Resources Minister Wilson Pastor said yesterday. The group is scheduled to meet in Vienna for an annual conference on Dec. 14.

Venezuela is seeking to maintain current OPEC quotas, Oil Minister Rafael Ramirez said yesterday. Member countries exceeding the limit should lower their output, he said. The group’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

Money managers included hedge-funds reduced bullish bets on oil for the week ended Nov. 22, according to data released yesterday by ICE Futures Europe and the Commodity Futures Trading Commission.

Managers cut bullish bets on Brent crude by 5,356 contracts in the week ended Nov. 22, London-based ICE said yesterday in its weekly Commitment of Traders report. Net-long bets on WTI fell by 26,387, or 12 percent, to 189,688, CFTC data showed. It was the largest drop since the week ended Aug. 2.

--Editors: John Buckley, Raj Rajendran

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

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


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