Oil in New York Drops on Growth Concern as Euro-Region Economy Contracts
Crude futures dropped in New York amid concern that slowing global growth will curb fuel demand after Europe’s economy contracted in the fourth quarter.
Oil slipped and the euro declined following a report that the region’s gross domestic product shrank last quarter as investment dropped by the most since 2009, adding to signs the debt crisis is hampering growth. Australian policy makers said the world economy will rise this year at a pace trailing its longer-term trend. South Korea’s finance ministry said higher oil prices are making the nation’s economic outlook uncertain.
“The euro is having a damping impact on commodities,” Ole Hansen, a senior manager of trading advisory at Saxo Bank A/S, said by phone from Copenhagen. The currency dropped as much as 0.7 percent today to $1.31. “There are still worries about a disorderly default in Greece. We have a crisis that is not solved,” Hansen said.
Crude for April delivery declined as much as 0.9 percent, or 91 cents, to $105.81 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.22 as of 12:42 p.m. London time. The contract added 2 cents yesterday to $106.72, the highest settlement since March 1. Prices fell last week for the first time in four weeks, reducing their gain this year to 7.3 percent.
Brent oil for April settlement on the ICE Futures Europe exchange in London was at $123.20 a barrel, down 60 cents. The European benchmark’s premium to West Texas Intermediate futures was at $16.98 a barrel, versus a record $27.88 on Oct. 14.
Euro-area GDP shrank 0.3 percent in the fourth quarter from the previous three months as exports and household spending declined, the European Union’s statistics office said today. The European Central Bank will keep its benchmark interest rate at a record low 1 percent when it meets on March 8, a Bloomberg survey showed.
China, the world’s largest commodities consumer, yesterday cut its economic growth target to 7.5 percent from an 8 percent level in place since 2005.
“The Chinese growth outlook is weighing on oil prices along with the euro and a commodity wide sell-off,” said Tony Machacek, a London-based Bache Commodities Ltd. broker.
Oil earlier gained as much as 0.6 percent after Israel’s Prime Minister Benjamin Netanyahu said in a speech in Washington yesterday that economic sanctions on Iran haven’t led the country to curtail its nuclear program, and Israel must be able to defend itself against a threat to its existence.
In a meeting at the White House, U.S. President Barack Obama told Netanyahu “there is still a window” for a diplomatic solution to the confrontation, while “all options” are available to prevent a nuclear-armed Iran.
Iran is the second-largest producer in the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s crude. The Gulf state’s military capabilities have grown and the government would retaliate in kind against an Israeli attack, Tehran-based Press TV reported.
U.S. crude stockpiles rose 1.5 million barrels last week, according to the median estimate of seven analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Gasoline stockpiles fell 2 million barrels and distillate-fuel supplies, a category that includes heating oil and diesel, dropped 1.8 million barrels, the survey showed.
The industry-funded American Petroleum Institute will release its own stockpile data in Washington today.
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