Bloomberg News

Brent Oil Declines for Second Day in London Before ECB Meeting

September 05, 2012

Brent crude declined for a second day in London before a meeting of European Central Bank policy makers amid signs that the bloc’s debt crisis is hurting the global economy.

Futures fell as much as 0.7 percent. Prices pared earlier losses after two officials said ECB President Mario Draghi will announce plans for unlimited purchases of government debt. The ECB will discuss the proposal today, and Draghi will hold a news conference tomorrow. Australia’s economy slowed last quarter on weaker housing and rising imports, according to the country’s Bureau of Statistics.

“The debt crisis is still a big risk factor,” said Sintje Boie, an analyst at HSH Nordbank in Hamburg who correctly predicted oil’s rebound in July. “Looking at the world economy, there’s no reason to have oil prices of $120,” said Boie, who forecasts Brent crude will fall toward $105 by year-end.

Brent oil for October settlement dropped as much as 82 cents to $113.36 a barrel on the ICE Futures Europe exchange. It was at $113.90 at 1:48 p.m. local time.

Oil for October delivery was at $95.50 a barrel, up 20 cents, in electronic trading on the New York Mercantile Exchange. The contract decreased $1.17 yesterday to close at $95.30, the lowest level since Aug. 30.

Draghi’s Blueprint

Under Draghi’s plan, which may be called “Monetary Outright Transactions,” the ECB would refrain from setting a public cap on yields, according to the people, and a third official, who spoke on condition of anonymity. The proposal will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of about as much as three years, two of the people said.

Australia’s second-quarter gross domestic product advanced 0.6 percent from the previous three months, when it rose a revised 1.4 percent, according to a Bureau of Statistics report released today in Sydney.

The ISM factory index slid to 49.6 last month, the lowest level since July 2009, from 49.8 in July, the Tempe, Arizona- based group said yesterday. Economists in a Bloomberg survey projected an August reading of 50, the dividing line between expansion and contraction.

“The somewhat disappointing ISM figure in the U.S. clouds the demand outlook,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It’s showing a picture of relatively weak conditions and the possibility of softness in production output for the next few months. For oil, that comes against a background where prices have risen a long way already and there’s adequate supply capacity.”

Manufacturing Survey

A gauge of manufacturing in the 17-nation euro area based on a survey of purchasing managers was revised lower to 45.1 in August from 45.3 estimated earlier, London-based Markit Economics said Sept 3. The index has held below 50 for 13 months. A similar survey for China showed the fastest contraction in August since March 2009, Markit and HSBC Holdings Plc said the same day.

Crude stockpiles dropped 5.5 million barrels last week as Hurricane Isaac shut offshore platforms, according to a Bloomberg survey before a government report tomorrow.

U.S. gasoline stockpiles probably fell 3 million barrels last week, according to the median estimate of nine analysts in the Bloomberg survey before the Energy Department report. Distillate supplies, a category that includes heating oil and diesel, dropped 1.5 million barrels, the survey shows. The American Petroleum Institute will release separate inventory data today.

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

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


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