Crude Oil Declines to One-Week Low on Italian Debt, China Import Report
Oil fell to the lowest level in a week in New York as concern that the European debt crisis will spread to Italy caused the euro to tumble against the dollar and a report showed Chinese imports slumped.
Oil dropped 1.1 percent as the euro slid to a seven-week low against the dollar after Germany’s Die Welt said the European Central Bank is forecasting a regional bailout fund may have to double to cover a crisis in Italy. Data showing a 10 percent decline in Chinese imports stoked concern that fuel demand in the biggest crude-consuming countries will wane in the wake of a U.S. employment report on July 8.
“There’s some pressure on oil from concerns in the euro zone,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The euro got hit pretty good. The negative jobs data in the U.S. from last week has cast a negative cloud over the market, and there continues to be some signs of slowing in China.”
Crude for August delivery fell $1.05 to settle at $95.15 a barrel on the New York Mercantile Exchange, the lowest level since July 1. Prices have risen 25 percent in the past year.
Brent oil for August settlement declined $1.09, or 0.9 percent, to $117.24 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.09 a barrel to U.S. futures, 20 cents below the settlement record of $22.29 from June 15.
European Bailout Fund
Euro-area countries may have to double their bailout fund to 1.5 trillion euros ($2.1 trillion), according to Die Welt, which cited unidentified “high-ranking” people at European central banks.
A meeting of EU and European Commission chiefs today was expanded to include European Central Bank President Jean-Claude Trichet, Luxembourg Prime Minister Jean-Claude Juncker and European Economic Commissioner Olli Rehn.
The euro dropped 1.7 percent to $1.4017 at 3:12 p.m. in New York. Earlier, it touched $1.3987, the lowest intraday price since May 23. A weaker euro and stronger dollar curb the appeal of commodities as an alternative investment to the U.S. currency.
The Standard & Poor’s GSCI Index of 24 raw materials tumbled 0.9 percent, the most in more than two weeks, to 679.56. Nineteen of the commodities fell.
Chinese Imports
Government reports in China showed net oil imports shrank 10 percent in June to the lowest level in eight months, according to Bloomberg calculations, while inflation surged to a three-year high. The U.S. Labor Department reported July 8 that the unemployment rate rose to the highest level this year in June.
The U.S. and China are the two largest oil-consuming countries.
China imported 19.7 million metric tons and exported 270,000 tons of crude, customs data showed. Net imports of fuel, including gasoline and diesel, rose to 1.36 million tons in June from 930,000 tons in May, according to the data. Net purchases reached a 29-month high of 2.07 million tons in December.
“We have a confluence of factors today, weak U.S. payroll data, Italian bank concerns and the Chinese trade data,” said Serene Lim, a commodity strategist with Australia & New Zealand Banking Group Ltd. in Singapore.
U.S. payrolls increased by 18,000 in June, the Labor Department data showed July 8. The median estimate in a Bloomberg News survey called for a gain of 105,000. The jobless rate rose to 9.2 percent.
U.S. Equities Slip
U.S. equities also tumbled on the Italian concern and Chinese inflation report. The Standard & Poor’s 500 Index fell 1.8 percent to 1,319.49 at 4:03 p.m. in New York. The Dow Jones Industrial Average dropped 151.44 points, or 1.2 percent, to 12,505.76.
Oil futures in New York have fallen 3.6 percent since settling at a three-week high of $98.67 on July 7.
Net-long bets on crude gained by 12,343 futures and options combined, or 8.1 percent, to 165,491, in the seven days ended July 5, according to the Commodity Futures Trading Commission’s Commitments of Traders report released late July 8.
On the ICE Futures Europe exchange, hedge funds and other money managers increased their net-long Brent crude position in the week ended July 5. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 67,782 contracts, the London-based exchange said today in its weekly Commitment of Traders report. Net long positions rose by 24,474 contracts from a week earlier.
Oil volume in electronic trading on the Nymex was 510,728 contracts as of 3:14 p.m. in New York. Volume totaled 692,799 contracts July 8, 0.8 percent above the average of the past three months. Open interest was 1.53 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
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