BLBG: Oil Drops From Near a One-Week High on Concern Ireland Crisis May Spread
Oil fell from near a one-week high in London amid concern that Ireland’s debt crisis will spread to Portugal and Spain, limiting economic growth and diminishing fuel demand.
Brent futures slipped as the euro dropped to a two-month low against the dollar, curbing investor demand for commodities priced in the U.S. currency. North Korea’s state news agency warned its confrontation with South Korea could lead to war, sending equities lower. The MSCI Asia Pacific Index headed toward its biggest loss in two weeks.
“We expect downward pressure to come from the Eurozone debt crisis, worries about China overtightening to head off inflation, and risk aversion due to the situation between North and South Korea,” said Mike Wittner, head of oil market research at Societe Generale SA in London.
Brent crude for January settlement fell as much as $1, or 1.2 percent, to $85.10 a barrel and was at $85.11 a barrel at 10:14 a.m. on the ICE Futures Europe exchange in London.
On the New York Mercantile Exchange, floor trading was closed yesterday for Thanksgiving in the U.S. and electronic trades are booked with today’s for settlement purposes. The January contract dropped 71 cents, or 0.9 percent, to $83.15 a barrel in electronic trading at 10:15 a.m. London time.
“The euro tends to sum up the concerns on the ground and the risks or premiums associated with possible defaults,” said Mark Keenan, chief investment officer at fund manager Cubit Asset Management Pte in Singapore. “Overall, the backdrop of fundamental data for crude isn’t hugely bullish at the moment.”
The euro fell as low as $1.3218, the currency’s weakest rate against the dollar since Sept. 21, and was at $1.3247 at 10:20 a.m. London time. The single currency has fallen 3.1 percent this week.
‘March Toward $90’
Oil had earlier pared losses in London amid speculation that China’s higher refinery output to meet a diesel shortage will boost demand. Refineries ran at 87.71 percent of capacity as of yesterday, 0.3 percentage point higher than two weeks earlier, data from Oilchem.net showed today.
China’s oil-product stockpiles fell 5.2 percent in October from a month earlier, Xinhua News Agency said on Nov. 22. PetroChina Co., the biggest oil and gas producer in the nation, said this week that it’s planning additional diesel imports from overseas.
“Robust U.S. economic statistics, plunging fuel supplies, and China’s diesel famine should help oil prices march toward $90 a barrel,” Gordon Kwan, the Hong Kong-based head of regional energy research at Mirae Asset Securities Ltd., said in a report today.
Oil prices are forecast to be little changed next week as signs of U.S. economic recovery are balanced by concerns that Europe’s debt crisis may hurt growth and fuel demand, according to a Bloomberg News survey.
Fifteen of 36 analysts, or 42 percent, predicted crude oil will be little changed through Nov. 26. Last week, 47 percent said futures would rise.
To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
