BLBG: Oil Falls for Fifth Day as German Output Drops, Dollar Gains
By Rachel Graham
Dec. 8 (Bloomberg) -- Crude oil declined for a fifth day, the longest losing streak since July, as German industrial production unexpectedly declined and the dollar strengthened.
Oil dropped below $73 a barrel in New York after a report showed factory output in Europe’s largest economy declined 1.8 percent in October from the previous month. The dollar gained as investors spurned commodities and other riskier assets on concern government deficits aren’t sustainable. Fitch Ratings downgraded Greece’s rating.
“If economic recovery is weaker than expected then people will start thinking about how that affects oil demand,” said Angelos Damaskos, who manages the Junior Oils Trust in London, a fund that invests in exploration companies. “The market has run ahead of economic reality.”
Crude oil for January delivery fell as much as $1.39, or 1.9 percent, to $72.54 a barrel in electronic trading on the New York Mercantile Exchange and traded at $72.67 as of 1:30 p.m. London time. Crude has dropped 11 percent since reaching a year- to-date high of $82 on Oct. 21.
Moody’s Investors Service said today deteriorating public finances in the U.S. and U.K. may “test the Aaa boundaries.” U.S. Federal Reserve Chairman Ben Bernanke told the Washington Economic Club yesterday that the U.S. economy faces “formidable headwinds,” while Japan’s government backed a stimulus package worth 7.2 trillion yen ($81 billion).
The dollar gained to $1.4775 against the euro after falling as low as $1.4867. Oil often moves in the opposite direction to the dollar as investors use commodities as a hedge against currency movements.
Stockpile Report
A report tomorrow is expected to show U.S. crude inventories gained for a third week. Stockpiles of crude oil added 500,000 barrels in the week ended Dec. 4 from 339.9 million the prior week, according to a Bloomberg survey.
“WTI is under pressure because of weak crude oil demand in the U.S., weak crude runs in refineries,” Christophe Barret, an analyst at Calyon in London, said by phone. “The correlation between oil and the dollar is very strong today.”
New York’s oil benchmark traded at the biggest discount to Brent crude in more than three months as stockpiles climbed in the U.S. Midwest.
Oil inventories at Cushing, Oklahoma, the delivery point for the West Texas Intermediate contracts traded on the New York Mercantile Exchange, rose to 30.89 million barrels in the week ending Nov. 27, the highest since early September.
Brent crude oil for January settlement on the London-based ICE Futures Europe exchange fell as much as $1.21, or 1.6 percent, to $75.22 a barrel and traded at $75.44 a barrel at 1:32 p.m. local time.
The U.S. Energy Department is scheduled to release the data at 10:30 a.m. tomorrow in Washington.
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net
