Oil traded near its lowest settlement in six months as the European Central Bank suspended lending to some Greek institutions, fanning concern that the region’s debt crisis will hurt fuel demand.
West Texas Intermediate pared an advance of as much as 1 percent, and Brent traded below $110 for a barrel. The Frankfurt-based ECB said yesterday it will push the responsibility for lending to some Greek financial institutions onto the country’s central bank until they have sufficiently boosted their capital. Oil had gained as Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD:US) prepared to reverse flows on their Seaway pipeline, relieving a supply build-up at the main U.S. storage site in Cushing, Oklahoma.
“The picture in Europe is far from calm,” said Robert Montefusco, senior broker at Sucden Financial Ltd. in London. “WTI had been taking a battering lately with all the stock builds, so if we get confirmation of crude moving down the reversed pipelines that may encourage buying.”
Crude for June delivery was at $93.13 at 1:35 p.m. London time in electronic trading on the New York Mercantile Exchange. It earlier rose as much as 91 cents to $93.72 a barrel. The contract yesterday fell 1.2 percent to $92.81, the lowest close since Nov. 2.
Brent oil for July settlement slipped 78 cents to $108.97 a barrel on the London-based ICE Futures Europe exchange. The contract traded earlier as low as $109.01, marking the first drop in front-month Brent futures to less than $110 since Jan. 25. The June contract expired yesterday, falling 53 cents to $111.71. The European benchmark contract was at a premium to West Texas Intermediate of $15.43, when comparing July contracts.
Oil has fallen this week as Greece failed to agree on a coalition government following May 6 elections, raising concern that Europe’s debt crisis will worsen and derail the global economic recovery.
Enbridge and Enterprise are scheduled to reverse the Seaway pipeline today, according to an April filing with federal regulators. A rise in Canadian and Midwest U.S. oil production, and limited transportation out of the Cushing storage hub, have created a supply glut.
Prices dropped yesterday after U.S. stockpiles rose to the highest level since 1990 and a report signaled the nation may release emergency supplies. Crude inventories climbed 2.1 million barrels last week to 381.6 million, data from the Energy Department showed.
The U.S. has called on other Group of Eight nations to prepare to release strategic oil reserves because of the full implementation of the European Union’s ban on imports from Iran starting July, the Kyodo news service reported, citing unidentified officials familiar with Japan-U.S. ties. G-8 leaders will meet tomorrow in Maryland.
“Oil inventories being built up in the Midwest, with nowhere to go, will start to be relieved because of the pipeline,” Victor Shum, managing director at consultant Purvin and Gertz Inc. in Singapore. “The recent moderation in oil prices may be temporary, global oil demand is likely to strengthen in the summer.”
Enbridge, the biggest carrier of Canadian oil to the U.S., said yesterday it will spend about $3 billion to boost the capacity of its mainline system and give western producers access to refiners in the Midwest and Quebec.
Oil in New York may find technical support at $92.75 a barrel, according to data compiled by Bloomberg. On the daily chart, that’s the 50 percent Fibonacci retracement of the rise from October’s intraday low of $74.95 to the March high of $110.55 and is where futures reversed a decline in December.
Crude’s 14-day relative strength index has been below 30 for the past week, signaling further losses may not be sustainable. Buy orders tend to be clustered near chart-support levels. The RSI was at 26 today.
-- Editors: Stephen Voss, Rob Verdonck
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