Crude oil declines on concern debt crisis to stall recovery
Sunday, 23 May 2010
LONDON, May 22 (Bloomberg): Crude oil fell as European governments struggled to contain the region's debt crisis, raising concern that it will slow the global economic recovery.
Futures dropped 1.1 per cent as European Union finance ministers met today in Brussels to discuss sovereign debt. Total US petroleum inventories climbed to the highest level in at least 20 years for the middle of May.
"The worry is that the European economy is going to drag the global economy into another recession," Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, said in an interview. "Because 2008 is so fresh in everybody's mind, everyone I talk to is just petrified."
Crude oil for July delivery dropped 76 cents to settle at $70.04 a barrel on the New York Mercantile Exchange. The July contract has fallen for nine consecutive days, losing 13 per cent since May 10. Prices slipped 7.1 per cent this week.
Oil prices are down 20 per cent from a 19-month high of $87.15 reached on May 3. Futures touched a record $147.27 on July 11, 2008.
Brent crude oil for July settlement slipped 16 cents to end the session at $71.68 a barrel on the ICE Futures Europe exchange in London. It was the lowest settlement since Feb. 8.
"Less than three weeks ago we were talking about how soon oil would reach $90," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. "Now we are wondering if prices will soon touch $60. The main reason for this change has been the evolving perception of the European debt crisis."
The euro has lost 12 per cent against the dollar this year amid concern the Greek fiscal crisis will spread to other nations as governments work to push down deficits.
German lawmakers approved their country's share of a $1 trillion euro-region bailout in a vote today, allaying market concern that they would balk at approving a second emergency aid package in as many weeks.
Chancellor Angela Merkel has called for regulation to stem Europe's debt crisis and forbid some types of short-selling this week. The US banned naked short-selling for about a month after Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008 with debt of $613 billion.
"A lot of what we've seen has to do with perception of the situation in Europe," said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. "A Greek default wouldn't spell the end of the euro and isn't akin to the fall of Lehman Brothers. As a result, oil prices will probably solidify soon."
Supplies of crude oil and all petroleum-based fuels increased to 1.81 billion barrels in the week ended May 14, the highest stockpiles on a seasonal basis in Energy Department data through 1990.
Futures dropped 1.1 per cent as European Union finance ministers met today in Brussels to discuss sovereign debt. Total US petroleum inventories climbed to the highest level in at least 20 years for the middle of May.
"The worry is that the European economy is going to drag the global economy into another recession," Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, said in an interview. "Because 2008 is so fresh in everybody's mind, everyone I talk to is just petrified."
Crude oil for July delivery dropped 76 cents to settle at $70.04 a barrel on the New York Mercantile Exchange. The July contract has fallen for nine consecutive days, losing 13 per cent since May 10. Prices slipped 7.1 per cent this week.
Oil prices are down 20 per cent from a 19-month high of $87.15 reached on May 3. Futures touched a record $147.27 on July 11, 2008.
Brent crude oil for July settlement slipped 16 cents to end the session at $71.68 a barrel on the ICE Futures Europe exchange in London. It was the lowest settlement since Feb. 8.
"Less than three weeks ago we were talking about how soon oil would reach $90," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. "Now we are wondering if prices will soon touch $60. The main reason for this change has been the evolving perception of the European debt crisis."
The euro has lost 12 per cent against the dollar this year amid concern the Greek fiscal crisis will spread to other nations as governments work to push down deficits.
German lawmakers approved their country's share of a $1 trillion euro-region bailout in a vote today, allaying market concern that they would balk at approving a second emergency aid package in as many weeks.
Chancellor Angela Merkel has called for regulation to stem Europe's debt crisis and forbid some types of short-selling this week. The US banned naked short-selling for about a month after Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008 with debt of $613 billion.
"A lot of what we've seen has to do with perception of the situation in Europe," said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. "A Greek default wouldn't spell the end of the euro and isn't akin to the fall of Lehman Brothers. As a result, oil prices will probably solidify soon."
Supplies of crude oil and all petroleum-based fuels increased to 1.81 billion barrels in the week ended May 14, the highest stockpiles on a seasonal basis in Energy Department data through 1990.