Crude Oil Falls for Second Day as Dollar's Gain Dims Appeal of Commodities
Sept. 7 (Bloomberg) -- Edward Morse, head of commodities research at Credit Suisse Group AG, talks with Bloomberg's Mark Crumpton about crude oil prices and the natural gas market. (Source: Bloomberg)
Crude oil fell the most in a week as the euro tumbled against the dollar on speculation that Europe’s debt crisis may worsen.
Oil dropped for a second day after German factory orders unexpectedly declined in July, causing the euro to weaken the most since Aug. 11. Futures slipped as the Standard & Poor’s 500 Index ended the longest winning streak in eight weeks on concern the European crisis will delay the economic recovery.
“The euro’s broken down and the dollar’s gotten stronger,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “That’s helping to put some pressure on oil.”
Crude for October delivery lost 51 cents, or 0.7 percent, to settle at $74.09 a barrel on the New York Mercantile Exchange, the biggest single-day decrease since Aug. 31. Prices have dropped 6.6 percent this year.
U.S. oil markets were closed yesterday for the Labor Day holiday. Electronic transactions for the day were booked with today’s trades for settlement purposes.
The euro fell 1.5 percent against the dollar to $1.2688 at 3:12 p.m. in New York from $1.2876 yesterday, curbing the appeal of commodities as an alternative investment. The euro has declined 1.6 percent since Sept. 3.
The S&P 500 lost 1.1 percent to 1,092.54, snapping a four- day rally. The Dow Jones Industrial Average fell 102.06 points, or 1 percent, to 10,345.87.
European Economy
“Equities are weaker and the dollar is stronger, so for the next few days we’re likely to move in a $70-to-$75 range,” Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg, said from Stuttgart.
German factory orders, adjusted for seasonal swings and inflation, declined 2.2 percent from June, when they surged a revised 3.6 percent, the Economy Ministry in Berlin said today. That’s the biggest drop since February 2009. Economists surveyed by Bloomberg News forecast a 0.5 percent gain.
European Union finance ministers failed to reach agreement today on a tax on financial transactions to bolster national budgets.
Oil also fell as Tropical Storm Hermine spared the oil- producing region in the Gulf of Mexico before making landfall in Mexico today.
U.S. crude stockpiles, which climbed in the last two weeks of August, are pressuring petroleum prices, according to a Barclays Capital report today. The New York crude market “continues to be weighed down by high U.S. onshore inventory levels,” and pending refinery maintenance, Barclays said in the report.
Driving Season
Labor Day marked the end of the U.S. summer driving season, the peak gasoline demand period. Refiners often idle processing units for maintenance in September and October as gasoline consumption drops and before heating-oil use increases.
Gasoline supplies were 14 percent above the five-year average in the week ended Aug. 27, compared with 26 percent for distillate fuels, including heating oil and diesel, and 11 percent for crude oil, according to the U.S. Energy Department last week.
Oil stockpiles probably rose 1 million barrels last week from 361.7 million in the week ended Aug. 27, based on the median estimate of nine analysts before an Energy Department report this week. Five respondents forecast inventories will rise, and four said they will drop.
The Energy Department will report its inventory statistics Sept. 9 and the industry-funded American Petroleum Institute will report its numbers tomorrow. Both are a day late this week because of the Labor Day holiday.
Gasoline Rises
Gasoline for October delivery rose 1.34 cents, or 0.7 percent, to $1.9329 a gallon after a fatal explosion at Petroleos Mexicanos’ Cadereyta refinery outside Monterrey, Mexico. A spokesman for Pemex, Latin America’s largest oil producer and the refinery’s owner, said he couldn’t comment on the effect on production. He declined to be named, citing company policy.
Earlier, gasoline fell as much as 2 percent.
Oil has settled between $71 and $76 a barrel for the past three weeks and “can stay in this range for a month or so,” Edward Morse, head of commodities research at Credit Suisse Group AG in New York, said in an interview on Bloomberg Television. “It depends on physical market fundamentals just as much as it does on macro sentiment.”
Brent crude for October settlement rose 87 cents, or 1.1 percent, to $77.74 a barrel on the ICE Futures Europe Exchange in London. The price is $3.65 higher than October futures in New York, the widest spread since May 20.
Price Differential
The differential between October and November oil on the Nymex was $1.76 a barrel, also the widest between the two contracts closest to expiration since May 20.
“The dollar is much stronger, and that has oil much lower in the front,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida, a trend that may continue as refineries begin seasonal maintenance, boosting oil supplies.
Oil volume in electronic trading on the Nymex was 764,405 contracts as of 3:15 p.m. in New York. Volume totaled 693,247 contracts Sept. 3, 11 percent above the average of the past three months. Open interest was 1.35 million contracts, the highest level since June 1.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Rate These Stories
Rate this Page