Oil Falls From Near a One-Week High as German Economy Approaches Recession
Oil fell from near the highest settlement in almost a week amid concern that a shrinking German economy may drag Europe into a recession, reducing demand.
Crude fell as much as 1.1 percent, equity markets retreated and the euro weakened against the dollar after Germany’s Federal Statistics Office said the biggest economy in the euro region contracted in the fourth quarter. Spanish factory output declined the most since 2009, a separate report showed. Futures earlier climbed 0. 2 percent after Iran’s Fars news agency said a nuclear scientist was killed in a bomb attack in Tehran, sparking concern supplies from Iran may be disrupted.
“The conditions in the euro zone continue to remain quite tentative, adding pressure on most commodity prices and global equity markets,” said Myrto Sokou, an analyst at Sucden Financial Ltd. in London. “Investors were prompted to some profit-taking, while the dollar rebounded against the euro and weighed on the oil market.”
Crude for February delivery fell as much as $1.08 to $101.16 a barrel and was at $101.44 at 1:37 p.m. London time. The contract yesterday climbed 0.9 percent to $102.24, the highest close since Jan. 4. Prices are up 2.7 percent this year.
Brent oil for February settlement fell 34 cents to $112.94 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $11.49, compared with $11.04 yesterday and a record $27.88 on Oct. 14.
European Weakness
Germany may be on the brink of recession after the sovereign debt crisis caused the economy to contract in the final quarter of 2011. Gross domestic product declined by about 0.25 percent in the fourth quarter from the third, the Federal Statistics Office in Wiesbaden said today. Spain’s industrial output declined 7 percent in November from a year earlier, the most since October 2009, the National Statistics Institute in Madrid said. The Stoxx Europe 600 index declined as much as 0.8 percent and the euro fell 0.8 percent to $1.2682.
In Iran, Mostafa Ahmadi Roshana, a director at the Natanz uranium enrichment facility in Iran’s Isfahan province and a professor at Tehran’s technical university, was killed in today’s blast, Fars reported today. A magnetic bomb was placed under his car by a person on a motorcycle, according to the news agency, which said the incident was similar to previous attacks on scientists involved in Iran’s nuclear program.
Embargo Talks
Four diplomats said European Union talks on blocking imports of Iranian oil are bogged down. Greece, Italy and Spain are trying to soften a U.K. push for a blanket ban, on concern that a supply shock would add to the economic damage from the European debt crisis, the diplomats said, declining to be identified because no final agreement has been reached. Foreign ministers from the 27 EU member states are scheduled to decide on sanctions on Jan. 23 in Brussels.
U.S. Treasury Secretary Timothy F. Geithner is in Beijing for talks with Chinese Premier Wen Jiabao and visits Japan tomorrow as he lobbies for sanctions against Iran’s atomic program. The Asian countries are the largest importers of Iranian oil, with China accounting for 22 percent and Japan buying 14 percent during the first half of last year, according to the U.S. Energy Information Administration.
“China will be less OK with it than Japan,” Matthew Levitt, a former financial intelligence official at the Treasury Department who is now at the Washington Institute for Near East Policy, said about the plan for sanctions.
Rising Stockpiles
An Energy Department report today may show U.S. crude inventories rose 1 million barrels last week, according to the median of 12 analyst estimates in a Bloomberg News survey. The industry-funded American Petroleum Institute said yesterday that inventories gained 397,000 barrels.
Gasoline supplies climbed 1.89 million barrels last week, figures from the API showed. They are forecast to increase 2.25 million barrels in the Energy Department report. Distillate inventories, a category that includes heating oil and diesel, rose 846,000 barrels compared with an estimate for a 2.25 million-barrel gain.
Oil has risen this year because of an improving economic outlook rather than tension with Iran, Goldman Sachs Group Inc. said in a report dated yesterday. The bank sees little evidence of an Iran premium in the oil price and has increasing confidence that Europe’s debt crisis will be contained in the region, according to the note from David Greely, head of energy research at Goldman in New York.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Lananh Nguyen in London at lnguyen35@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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