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Oil Falls From Three-Week High as Greece Counters U.S. Economy

Oil fell from the highest level in three weeks, paring a weekly advance, as concern that Europe’s debt crisis will worsen and global commodity demand is weakening countered signs of recovery in the U.S. economy.

West Texas Intermediate futures declined as much as 1.6 percent, snapping the longest run of gains since December. Greece won’t get financial aid until it implements an austerity plan, Luxembourg Prime Minister Jean-Claude Juncker said yesterday. The International Energy Agency reduced its 2012 global oil demand forecast for a sixth month, citing a “darkening” economic outlook, and China’s exports fell for the first time in more than two years. Initial U.S. jobless claims slid by 15,000 last week, the Labor Department said yesterday.

“The market’s losing ground on the Greek concern,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “The demand-supply situation for the rest of the year is not a critical point at this moment. It’s mainly the political and economic situation.”

Oil for March delivery fell as much as $1.59 to $99.89 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.38 at 1:04 p.m. London time. The contract rose a third day yesterday, climbing 1.1 percent to $99.84 for the highest close since Jan. 19. Prices have risen 0.6 percent this week and 13 percent in the past year.

Brent oil for March settlement slid $1.76 to $116.83 a barrel on the ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded WTI was at $18.45, compared with $18.75 at yesterday’s settlement and a record $27.88 on Oct. 14.

Greek Budget Measures

The euro retreated from a two-month high against the dollar before a Greek parliamentary vote on austerity measures this weekend that the nation’s Finance Minister Evangelos Venizelos said amounted to a referendum on euro membership. European finance ministers refused to deliver a bailout for Greece until the measures are passed into law.

German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin today that Greece is missing its debt-cutting targets, according to two people who took part in the meeting and declined to be named because it was held in private.

George Karatzaferis, the leader of one of three parties supporting Greek Prime Minister Lucas Papademos, pushed back against German demands for deeper budget cuts, saying he wouldn’t support austerity measures worked out for a rescue.

‘Remorseless Picture’

The IEA cut its 2012 global oil demand forecast for the sixth month, predicting worldwide crude consumption will increase by 800,000 barrels a day, or 300,000 less than previously estimated, to 89.9 million barrels a day, according to the Paris-based agency’s monthly oil market report today.

Consumption will drop in member nations of the Organization of Economic Cooperation and Development this year as Europe’s sovereign debt crisis slows growth, according to the IEA.

“It’s a pretty remorseless picture of decline for oil demand throughout the OECD,” David Fyfe, head of the agency’s market and industry division, said in a telephone interview from Paris. “These are mature markets, in which industry recovery is stuttering, and moving into recession in the case of Europe.”

The Organization of Petroleum Exporting Countries reduced its estimate of crude consumption for this year by 120,000 barrels a day to 88.76 million a day, the group’s Vienna-based secretariat said in its monthly market report yesterday. Supply from the 12 members increased to 30.9 million barrels a day last month, the most since October 2008, compared with estimated requirements of 29.55 million, the report showed.

China Exports Decline

China’s exports fell 0.5 percent in January as trade was disrupted by the Lunar New Year Holiday. Imports dropped 15.3 percent. China accounted for 11 percent of the world’s oil demand while European Union countries consumed 16 percent, according to BP Plc’s Statistical Review of World Energy.

The country’s crude imports last month rose 7.4 percent from a year ago to 23.41 million metric tons, or about 5.54 million barrels a day, according to preliminary data on the website of the Beijing-based General Administration of Customs.

U.S. first-time jobless claims fell to 358,000, compared with estimates that ranged from 355,000 to 385,000 in a Bloomberg News survey of 48 economists. The four-week moving average, a less-volatile measure, declined to 366,250, the lowest since April 26, 2008.

“The numbers at the moment are supporting a much better scenario in the U.S.,” said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “We had jobless claims reflecting a better employment situation and therefore a better outlook for oil.”

Spread Contracts

Investors should exercise “extreme caution” when trading the spread between the New York and London contracts, Michael Wittner, head of oil market research at Societe Generale SA in New York, said in a report dated yesterday. Traders who lost money on bets that the gap would narrow closed their positions, increasing the speed and magnitude of the widening gap, he said. The premium rose 46 percent in January, the most in 11 months.

Oil in New York may rise next week after U.S. refineries increased operating rates, bolstering demand for crude, a Bloomberg News survey showed. Nineteen of 36 analysts, or 53 percent, forecast prices will climb through Feb. 17. Eight respondents, or 22 percent, predicted futures will decline and nine estimated there will be little change. It was the most bullish response since April.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

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

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