Bloomberg News

Oil Declines For Fifth Day on Italy Political Turmoil

December 10, 2012

Oil declined for a fifth day in New York on concern a leadership change in Italy will disrupt efforts to curb Europe’s debt crisis.

Prices fell to a three-week low as Italian Prime Minister Mario Monti said he will resign, while his predecessor, Silvio Berlusconi, announced he will run for the premiership to roll back Monti’s budget tightening. Crude also slid as heating oil dropped to a four-month low on warmer-than-average weather as New York reached a high of 61 degrees Fahrenheit (16 Celsius).

“The situation in Italy is weighing on the whole euro zone and it should have wide-reaching impacts on the economy and oil demand,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We have 60- degree weather today here in New York and there is not a lot of demand for heating oil.”

Crude for January delivery slid 37 cents, or 0.4 percent, to $85.56 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 15. Prices are down 13 percent this year.

Brent for January settlement rose 31 cents, or 0.3 percent, to end at $107.33 a barrel on the London-based ICE Futures Europe exchange.

Italian 10-year bond yields jumped today in their first day of trading since Monti said on Dec. 8 that he planned to resign afterBerlusconi withdrew support for the government.

EU Leaders

Monti and other EU heads of state and government, who gathered in Oslo to collect the Nobel Peace Prize, are seeking to present a united front as the resurgent Berlusconi hits the campaign trail with his anti-austerity message.

“Monti’s resignation makes people more nervous about Europe’s debt crisis,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Crude followed declines in heating oil. January futures of the fuel slid 0.7 percent to $2.8962 a gallon, the lowest settlement since Aug. 2.

New York’s high of 61 degrees was 16 degrees above the average reading, according to AccuWeather Inc. in State College, Pennsylvania.

Commodity Weather Group LLC in Bethesda, Maryland, predicted normal or warmer-than-normal weather in most of the lower-48 states through Dec. 24.

About 26 percent of households in the Northeast depend on heating oil for space heating, according to the Energy Department.

Heating Oil

“We have very warm weather here in the U.S., which is kind of taking a hit to the heating oil market and weighing on oil,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.

Crude also dropped as investors watched the latest developments in American budget talks. President Barack Obama and House Speaker John Boehner met one-on-one yesterday at the White House, with representatives for the two leaders offering no details of the negotiations yet issuing identical statements afterward that “the lines of communication remain open.”

Oil rose as much as 1 percent earlier as China’s net crude imports climbed to a six-month high in November and German October exports unexpectedly increased.

China bought 23.25 million metric tons of crude more than it exported last month, according to figures released on the website of the Beijing-based General Administration of Customs today. That’s the equivalent of 5.68 million barrels a day, up 3 percent from a year earlier and the most since May, data compiled by Bloomberg show.

Upward Move

“The petroleum markets are attempting to organize a move higher around Chinese data that showed stronger November imports on the start-up of new refinery units, but are meeting with mixed results,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in an e-mail. “The macroeconomic outlook is uncertain, with the U.S. fiscal cliff unresolved.”

The Organization of Petroleum Exporting Countries will probably leave its production quota unchanged when it meets Dec. 12, a Bloomberg survey showed. The group will probably maintain its production quota at 30 million barrels a day of oil, according to a Bloomberg News survey of 18 analysts.

Electronic trading volume on the Nymex was 395,757 contracts as of 3:28 p.m. Volume totaled 494,081 contracts on Dec. 7, 5.2 percent lower than the three-month average. Open interest was 1.55 million.

To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net

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


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