Oil falls, capping worst month since 2008, on Spanish downgrade
Sunday, 30 May 2010
NEW YORK, May 29 (Bloomberg): Crude oil fell, capping the worst month since December 2008, after a decision by Fitch Ratings to strip Spain of its AAA credit grade pushed the euro lower.
Oil in New York dropped more than $12 a barrel in May as the euro's retreat reduced the appeal of commodities as an alternative investment. The cut increases concern that Europe's sovereign-debt crisis will worsen and undermine the global economic recovery.
"It's mainly a euro-led decline," said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, consulting firm, who said the currency could drop to $1.20 in the next week or two, pressuring oil to near $67 a barrel. Europe "still hasn't resolved some of their key issues."
Crude oil for July delivery fell 58 cents, or 0.8 per cent, to settle at $73.97 a barrel on the New York Mercantile Exchange. The 14 per cent decline in May was the biggest decrease since December 2008, when prices touched $32.40.
Fitch cut Spain's credit rating by one level to AA+ from AAA. Spain has held the top rating at Fitch since 2003. Standard & Poor's reduced the country's rating to AA on April 28.
The euro lost 0.5 per cent against the dollar to $1.2296 at 3:15 p.m. in New York from $1.2362 yesterday.
The Standard & Poor's 500 Index dropped 0.8 per cent to 1,094.69, and the Dow Jones Industrial Average decreased 80.04 points, or 0.8 per cent, to 10,178.95.
Oil also declined after a Commerce Department report showed spending by US consumers unexpectedly stalled in April. Purchases were unchanged last month, the first time without a gain since September. Consumer spending was forecast to rise 0.3 per cent, based on the median estimate of 77 economists surveyed by Bloomberg News.
Incomes climbed 0.4 per cent for a second month, and the savings rate rose for the first time in four months, the Commerce Department report showed.
"I don't see the US economy taking off significantly enough to drive things up," said Kyle Cooper, a managing director at energy consultant IAF Advisors in Houston. "We're stuck in roughly a $70 or $80 range and will jump around based on the latest jobless numbers and economic reports and whether China is growing faster or slower than expected." Oil rose 8.4 per cent in the previous two sessions, halting a 20 per cent decline since May 3.
The Organisation of Petroleum Exporting Countries, supplier of about 40 per cent of the world's oil, increased crude-oil output by 187,000 barrels a day in May to a 17-month high of 29.372 million per day, a Bloomberg News survey showed.
In earlier trading, prices touched $75.72, a two-week high, as the Thomson Reuters/University of Michigan final May consumer sentiment index increased to 73.6 from 72.2 in April. The gauge was projected to rise to 73.3 from the previous month, according to the median forecast in a Bloomberg News survey of 64 economists.
About 28 million people will be on road trips during the holiday weekend in the US, a jump of 5.8 per cent from a year earlier and the first increase since 2005, according to AAA, the nation's biggest motoring organization, which calculates the period over five days, from yesterday through Memorial Day on May 31.
"Overall demand is still growing," said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. "It's a holiday weekend, and AAA is looking at a 5 per cent increase over last year. If we can look and see people are saving last month, they're going to hop in the car and spend it in this one."
Total fuel demand rose 0.6 per cent to 19.7 million barrels a day in the week ended May 21, according to a report this week from the Energy Department.
Gasoline for June delivery decreased 1.91 cents, or 0.9 per cent, to settle at $2.0198 a gallon on the Nymex. Its 16 per cent drop in May was the largest since November 2008. The June contract expired at the close of floor trading. The July contract fell 88 cents, or 0.4 per cent, to $2.0266 a gallon.
Prices will probably rise next week, a Bloomberg News survey showed. Sixteen of 40 analysts, or 40 per cent, forecast oil will increase through June 4. Twelve respondents, or 30 per cent, predicted futures will decline and 12 said the contract will be little changed.
Nymex floor trading will be closed May 31 for Memorial Day. Electronic trading will start at 6 p.m. New York time on May 30 and continue through 1:15 p.m. the following day. All trades will count toward the June 1 settlement.
Brent crude for July settlement dropped 64 cents, or 0.9 per cent, to $74.02 a barrel on the ICE Futures Europe exchange. It fell 15 per cent in May, the most since November 2008.
Oil volume in electronic trading on the Nymex was 523,539 contracts as of 3:14 p.m. in New York. Volume totaled 691,648 contracts yesterday, 8 per cent below the average of the past three months. Open interest was 1.36 million contracts.
Oil in New York dropped more than $12 a barrel in May as the euro's retreat reduced the appeal of commodities as an alternative investment. The cut increases concern that Europe's sovereign-debt crisis will worsen and undermine the global economic recovery.
"It's mainly a euro-led decline," said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, consulting firm, who said the currency could drop to $1.20 in the next week or two, pressuring oil to near $67 a barrel. Europe "still hasn't resolved some of their key issues."
Crude oil for July delivery fell 58 cents, or 0.8 per cent, to settle at $73.97 a barrel on the New York Mercantile Exchange. The 14 per cent decline in May was the biggest decrease since December 2008, when prices touched $32.40.
Fitch cut Spain's credit rating by one level to AA+ from AAA. Spain has held the top rating at Fitch since 2003. Standard & Poor's reduced the country's rating to AA on April 28.
The euro lost 0.5 per cent against the dollar to $1.2296 at 3:15 p.m. in New York from $1.2362 yesterday.
The Standard & Poor's 500 Index dropped 0.8 per cent to 1,094.69, and the Dow Jones Industrial Average decreased 80.04 points, or 0.8 per cent, to 10,178.95.
Oil also declined after a Commerce Department report showed spending by US consumers unexpectedly stalled in April. Purchases were unchanged last month, the first time without a gain since September. Consumer spending was forecast to rise 0.3 per cent, based on the median estimate of 77 economists surveyed by Bloomberg News.
Incomes climbed 0.4 per cent for a second month, and the savings rate rose for the first time in four months, the Commerce Department report showed.
"I don't see the US economy taking off significantly enough to drive things up," said Kyle Cooper, a managing director at energy consultant IAF Advisors in Houston. "We're stuck in roughly a $70 or $80 range and will jump around based on the latest jobless numbers and economic reports and whether China is growing faster or slower than expected." Oil rose 8.4 per cent in the previous two sessions, halting a 20 per cent decline since May 3.
The Organisation of Petroleum Exporting Countries, supplier of about 40 per cent of the world's oil, increased crude-oil output by 187,000 barrels a day in May to a 17-month high of 29.372 million per day, a Bloomberg News survey showed.
In earlier trading, prices touched $75.72, a two-week high, as the Thomson Reuters/University of Michigan final May consumer sentiment index increased to 73.6 from 72.2 in April. The gauge was projected to rise to 73.3 from the previous month, according to the median forecast in a Bloomberg News survey of 64 economists.
About 28 million people will be on road trips during the holiday weekend in the US, a jump of 5.8 per cent from a year earlier and the first increase since 2005, according to AAA, the nation's biggest motoring organization, which calculates the period over five days, from yesterday through Memorial Day on May 31.
"Overall demand is still growing," said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. "It's a holiday weekend, and AAA is looking at a 5 per cent increase over last year. If we can look and see people are saving last month, they're going to hop in the car and spend it in this one."
Total fuel demand rose 0.6 per cent to 19.7 million barrels a day in the week ended May 21, according to a report this week from the Energy Department.
Gasoline for June delivery decreased 1.91 cents, or 0.9 per cent, to settle at $2.0198 a gallon on the Nymex. Its 16 per cent drop in May was the largest since November 2008. The June contract expired at the close of floor trading. The July contract fell 88 cents, or 0.4 per cent, to $2.0266 a gallon.
Prices will probably rise next week, a Bloomberg News survey showed. Sixteen of 40 analysts, or 40 per cent, forecast oil will increase through June 4. Twelve respondents, or 30 per cent, predicted futures will decline and 12 said the contract will be little changed.
Nymex floor trading will be closed May 31 for Memorial Day. Electronic trading will start at 6 p.m. New York time on May 30 and continue through 1:15 p.m. the following day. All trades will count toward the June 1 settlement.
Brent crude for July settlement dropped 64 cents, or 0.9 per cent, to $74.02 a barrel on the ICE Futures Europe exchange. It fell 15 per cent in May, the most since November 2008.
Oil volume in electronic trading on the Nymex was 523,539 contracts as of 3:14 p.m. in New York. Volume totaled 691,648 contracts yesterday, 8 per cent below the average of the past three months. Open interest was 1.36 million contracts.