Oil Drops on Concern Italy’s Turmoil May Derail European Economy
Futures fell as much as 1.9 percent after reaching their highest price in more than three months. European equities declined and the euro sank against the dollar as the cost of insuring against Italian default rose to a record. The Energy Department may say today gasoline supplies rose by 1 million barrels, analysts indicated in a Bloomberg News survey.
“Further deterioration of the euro-zone crisis has shifted its focus from Greece to Italy, an economy too big to be bailed out,” said James Zhang, a strategist at Standard Bank Plc in London. “It has spurred a general ‘risk off’ in the market.”
Crude for December delivery dropped as much as $1.79 to $95.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $95.59 at 1:15 p.m. London time. The contract earlier rose to $97.32, the highest since Aug. 1.
Brent oil for December settlement on the ICE Futures Europe exchange in London was down 1.4 percent at $113.40 a barrel, reversing a gain of 0.7 percent to $115.75. The European benchmark was at a premium of $17.81 to New York crude, compared with a record settlement of $27.88 on Oct. 14.
Italian Prime Minister Silvio Berlusconi agreed to step down as 10-year borrowing costs for the region’s third-biggest economy approach the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts.
German economic growth may slow next year, according to a panel of independent economic advisers to German Chancellor Angela Merkel. Europe’s largest economy will grow by 0.9 percent next year after 3 percent in 2011, they wrote in an annual report published in Berlin today.
The Energy Department’s report may show gasoline supplies rose to 207.3 million barrels last week, while crude stockpiles increased by 500,000 barrels to 340 million, according to the median estimate of 13 analysts surveyed by Bloomberg News.
The industry-funded American Petroleum Institute said yesterday gasoline inventories fell by 1.5 million barrels to 207.1 million, the lowest since August 2009. Distillate-fuel stockpiles, including heating oil and diesel, were down 2.9 million barrels, declining for a seventh week, the API said.
Crude inventories climbed 148,000 barrels, the institute said. The U.S. is the world’s biggest oil consumer, using 19.1 million barrels a day in 2010, or 21 percent of global consumption, according to BP Plc’s Statistical Review.
Global demand for energy is set to increase 40 percent by 2035, according to the International Energy Agency. Consumption will rise 1.3 percent a year to 16.96 billion metric tons of oil equivalent in 2035, spurred by China and other emerging economies, the Paris-based agency said today in its annual World Energy Outlook report.
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