Oil Snaps Five-Day Losing Streak as Decline to Near $70 Draws Investors
Aug. 25 (Bloomberg) -- Brian Battle, vice president of trading at Performance Trust Capital Partners, talks about the outlook for U.S. stocks. Battle, speaking from Chicago with Betty Liu, Jon Erlichman and Adam Johnson on Bloomberg Television's "In the Loop," also discusses his view on investing in oil stocks. (Source: Bloomberg)
Oil fell to its lowest price in seven weeks before a report forecast to show that U.S. inventories of crude increased as summer driving demand ebbs.
The U.S. Energy Department will probably report today that crude stockpiles gained 300,000 barrels last week after three weeks of declines, a Bloomberg survey showed. Oil extended losses after the U.S. Commerce Department reported a smaller increase in durable goods orders than analysts had predicted.
“U.S. consumption is still very low; product inventories are sky-high,” said Tobias Merath, Zurich-based head of commodity research at Credit Suisse Group AG. “In every market we’ve seen fears of a double-dip recession and oil has been particularly affected.”
Crude for October delivery declined as much as 53 cents, or 0.7 percent, to $71.10 a barrel, in electronic trading on the New York Mercantile Exchange, its lowest since July 6. It traded for $71.36 as of 1:38 p.m. London time. Brent crude for October delivery dropped 20 cents to $72.18 a barrel on the London-based ICE Futures Europe Exchange.
Figures from the Commerce Department showed that bookings increased 0.3 percent, compared with the 3 percent median estimate of 75 economists surveyed by Bloomberg News. Excluding transportation equipment, demand unexpectedly fell.
The Energy Department will issue its weekly report at 10:30 a.m. local time in Washington D.C. today. U.S. gasoline stockpiles probably declined 450,000 barrels in the week ended Aug. 20, based on the median estimate from 18 analysts surveyed.
‘Disappointing Headlines’
Further evidence that the U.S. is sliding back into a recession will send New York oil below $70 a barrel, according to Stephen Schork, president of consultant Schork Group Inc.
“The market has declined in 13 out of the last 15 sessions and dollar volatility has dropped in accord,” Schork, based in Villanova, Pennsylvania, wrote in a report today. “At this point, all it will take is one more disappointing headline and/or dollar strength. The bears would then be in a position for a run at the lows, mid $60s, seen in May.”
Christof Ruehl, BP Plc’s chief economist, expects crude prices to remain in a range of $70 to $75 a barrel until the middle of 2011. Ruehl made his comments today at the ONS oil and gas conference in Stavanger, Norway.
The difference between oil prices for delivery next year and in five years’ time indicates that investors are pessimistic about future demand for the commodity, according to PVM Oil Associates Ltd.
While New York oil futures for delivery in December 2011 are trading at a $5 a barrel premium to those for settlement this December, the additional cost of contracts in 2015 is only $5.50, the broker said in a report today.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
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