Oil Declines From One-Month High on Fuel Demand Concern
Oil slid from the highest level in a month in New York as the dollar rose amid speculation that this week’s gains have been excessive because a global economic slowdown may curb demand.
Futures fell as much as 1.3 percent after Societe Generale SA cut its crude-price forecasts, citing ample supply and speculation that Europe’s debt crisis and an economic slowdown in China will curb investor demand for commodities. The dollar rose against the euro, making commodities less attractive as an alternative investment.
“Most commodities except natural gas are down today and it’s largely because the Dollar Index is up,” Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant, said in a telephone interview. “Today’s markets, although the moves are not very significant, are being driven by commodity-currency arbitrage rather than fundamental data.”
Crude for August delivery dropped 61 cents, or 0.7 percent, to $87.05 a barrel at the end of electronic trading on the New York Mercantile Exchange at 1:15 p.m. The contract yesterday surged $3.91 to $87.66, the highest close since May 30. Prices are 12 percent lower this year. Floor trading is closed today for the U.S. Independence Day holiday.
Brent oil for August delivery on the London-based ICE Futures Europe exchange fell 91 cents, or 0.9 percent, to settle at $99.77 a barrel. The European benchmark crude was at a premium of $12.79 to New York-traded West Texas Intermediate, from $13.02 yesterday.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, advanced 0.3 percent to 82.11 at 1:40 p.m.
Societe Generale predicted New York crude will average $84.17 a barrel in the third quarter and Brent will be $96.67, Michael Wittner, the New York-based head of oil-market research at the bank, said in a report e-mailed today. The bank earlier forecast $97.50 for WTI and $110 for Brent.
Officials from Europe and Iran met today to examine proposals for settling differences over the Persian Gulf nation’s nuclear program, the European Union said. They discussed “a number of technical subjects” in Istanbul, the EU said in an e-mailed statement.
Iran’s nuclear work has prompted international sanctions on its oil exports. The nation’s Revolutionary Guard Corps fired long-range missiles as part of a war game targeting potential enemies, state media reported yesterday. Iran’s parliament is working on legislation to close the Strait of Hormuz, passage for a fifth of the world’s oil trade, to tankers linked to countries applying the embargo.
“The Iranian geopolitical risk exists and should not be denied, but the specific test-fire of missiles yesterday does not represent an increase per se of that risk,” Olivier Jakob, managing director of Petromatrix GmbH, a researcher in Switzerland, said in a note today.
In Norway, an oil workers’ strike that has cut output by about 15 percent will continue after mediation today failed to reach an agreement, the Oslo-based NTB news agency reported, without saying where it got the information.
Workers decided not to expand the strike, which has closed down 250,000 barrels a day of oil production, Hilde-Marit Rysst, leader of the SAFE union, said by phone from Stavanger, Norway, yesterday. SAFE is one of three unions taking part in the walkout.
Electronic trading volume on the Nymex was 53,571 contracts. Volume totaled 605,429 contracts yesterday, compared with the three-month average of 567,000. Open interest was 1.42 million.
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