BS: Crude Oil Falls for a Third Day as Doubts Grow About Recovery
By Grant Smith and Christian Schmollinger
Feb. 5 (Bloomberg) -- Crude oil fell, extending its biggest drop in six months, as equities and the euro slumped on concern that the economic recovery may falter.
Oil declined for a third day to trade below $73 a barrel as the dollar’s gains against the euro dulled crude’s appeal for hedging against inflation. An increase in U.S. jobless claims reported yesterday and growing concern over European sovereign debt sent stock markets falling around the world.
“Negative news about future economic growth prospects makes a huge impact on market sentiment and thereby risk appetite in the market,” said Thina Saltvedt, a commodities analyst at Nordea Bank AB in Oslo. “We need to see more stable growth before the market turns its focus from demand worries and back to the future challenge of capacity constraints.”
Crude oil for March delivery declined as much as 68 cents, or 0.9 percent, to $72.46 a barrel in electronic trading on the New York Mercantile Exchange. It was at $72.63 as of 10:09 a.m. London time. Yesterday, the contract declined $3.84, or 5 percent, to $73.14 a barrel, the biggest drop since July 29. Prices are little changed from the end of last week.
European Central Bank President Jean-Claude Trichet said yesterday the economic outlook is subject to “uncertainty.” The euro has lost 4 percent this year against the dollar on concern Greece and other so-called peripheral nations will face increasing difficulty in curbing budget deficits that are in excess of European Union limits.
Equity Markets Fall
The Dow Jones Stoxx 600 Index lost 1.7 percent to 238.64 as of 9 a.m. London time, while the MSCI Asia Pacific Index decreased 2.6 percent to 114.59 at 5 p.m. in Tokyo.
U.S. initial jobless applications rose to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, the Labor Department reported yesterday.
“The equities and energy markets heard reality calling,” said Mike Sander, an investment adviser at Seattle-based Sander Capital Advisors. “The euro-zone looks like a possible bust and unemployment is still really bad.”
A report today may show U.S. unemployment held steady at 10 percent, based on a Bloomberg survey of 85 economists. The Labor Department is forecast to say that payrolls rose by 15,000 workers when it reports at 8:30 a.m. in Washington.
Brent oil for March settlement was at $71.42 a barrel, down 71 cents, on the London-based ICE Futures Europe exchange at 10:10 a.m. London time. It earlier fell as much as 88 cents to $71.25 a barrel. The contract declined $3.79, or 5 percent, to settle at $72.13 a barrel yesterday.
--With reporting by Margot Habiby in Dallas. Editors: John Buckley, Jonas Bergman
To contact the reporter on this story: Grant Smith in London at +44-20-7330-7353 or gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on +44-20-7073-3520 or sev@bloomberg.net
