Brent Crude Oil Falls on Concern Europe Debt Crisis Will Slow Fuel Demand

Brent crude declined in London as investors bet that Europe’s worsening debt crisis may slow the economy and crimp fuel demand. Futures in New York swung between gains and losses.

Brent slipped as much as 0.4 percent before European leaders hold a special summit this week after eight of the region’s banks failed stress tests. Concern the crisis is spreading pushed the euro lower against the dollar, limiting the appeal of commodities priced in the U.S. currency. Tropical Storm Bret formed north of the Bahamas as the second cyclone of the Atlantic hurricane season.

“Our global view is that we’ve hit a temporary patch of weakness in demand growth and in the next few months we expect that to turn around, notwithstanding some sort of big financial event or some further blow-up of this sovereign debt situation,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicts oil in New York will average $113 a barrel in the third quarter.

Brent oil for September settlement fell as much as 51 cents to $116.75 a barrel on the London-based ICE Futures Europe exchange, and was at $117.03 at 3:14 p.m. Sydney time. The contract dropped 0.4 percent last week. Prices are 55 percent higher the past year.

Crude for August delivery was at $97.22 a barrel, down 2 cents, in electronic trading on the New York Mercantile Exchange. Prices have fluctuated today, climbing as much as 0.5 percent and slipping as much as 0.3 percent. Futures increased 1.1 percent last week and are 27 percent higher the past year.

Candlestick Chart

Oil in New York swung between gains and losses today following an “inside day” formation on its candlestick chart, a sign investors are unsure where short-term prices are headed, according to data compiled by Bloomberg. This occurred after futures on July 15 failed to exceed the previous day’s high and fell less than the low.

Net-long positions, or bets on rising prices, in crude oil advanced 2 percent to 168,833 in the seven days ended July 12, according to the Commodity Futures Trading Commission’s Commitments of Traders report.

Oil in New York may continue to face technical resistance around $98 a barrel, near a one-year Fibonacci retracement level and the 50-day moving average, according to data compiled by Bloomberg. A breach of technical resistance usually means the market will advance further.

Brent Premium

Brent’s losses outpaced U.S. futures today, narrowing the difference between the front-month European benchmark contract and New York prices to a premium of $19.45 a barrel, compared with the record settlement of $22.63 on July 14.

Tropical storm Bret, located about 95 miles (150 kilometers) northwest of Great Abaco Island, has sustained winds of almost 40 miles per hour with some higher gusts, the U.S. National Hurricane Center said in an advisory at 11 p.m. Miami time yesterday. Force winds are extending outward up to 35 miles from the center, it said.

Alyeska Pipeline Service Co. restarted the Trans Alaska Pipeline yesterday after maintenance on two of the line’s pumping stations, Spokeswoman Michelle Egan said in an e-mail. The Anchorage, Alaska-based company halted operations south of Prudhoe Bay on July 16 to replace valves at Pump Station 4 and to straighten a pipe at Pump Station 11, the company said.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

• LinkedIn
• Google +1
• Print
• QUEUE