Oil Falls as Merkel Hangs Tough on Greek Bailout
Oil fell from a three-month high in New York as German Chancellor Angela Merkel said she expects Greece to fulfill the terms of its bailout and on skepticism central banks will ease monetary policy further.
Futures dropped 1 percent after Merkel said she and French President Francois Hollande will coordinate on their approach to Greece to keep pressure on the country to overhaul its economy. Crude gained as much as 1.1 percent in intraday trading as minutes of the Federal Reserve’s most recent meeting showed many policy makers favored more stimulus to spur growth.
“Prices took a hit after Merkel made it clear that she’s not going to give Greece easier terms,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Hopes for monetary easing have diminished, which is weighing on all markets.”
Crude oil for October delivery declined 99 cents to settle at $96.27 a barrel on the New York Mercantile Exchange. Futures fell as low as $95.75. The contract touched $98.29 earlier, the highest intraday level since May 4. Prices are up 13 percent from a year ago.
Brent oil for October settlement rose 10 cents to end the session at $115.01 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate crude, the grade traded in New York, was at $18.74, up from $17.65 yesterday.
Merkel, speaking to reporters in Berlin before hosting a working dinner with the French president, said they will discuss “how to receive our colleague,” Greek Prime Minister Antonis Samaras, who visits the German capital tomorrow and Paris on Aug. 25. She and Hollande, the leaders of Europe’s two biggest economies, are seeking common ground on Greece and the wider euro-area debt crisis.
Europe’s debt crisis has reduced economic growth and the continent’s energy demand for almost three years. The crisis that began in Greece has spread to Ireland, Portugal, Italy, Spain and Cyprus.
Equities dropped after the Labor Department said U.S. jobless claims rose by 4,000 for a second week to 372,000 in the period ended Aug. 18. The median forecast of 41 economists surveyed by Bloomberg called for 365,000.
U.S. consumer confidence dropped last week to the lowest level since January, according to the Bloomberg Consumer Comfort Index. The gauge decreased to minus 47.4 in the period ended Aug. 19, the sixth consecutive drop, from minus 44.4 in the prior period. The series of declines is the longest since 2008, when the U.S. was in recession.
“The oil market held up most but eventually the weakness of the S&P became too much,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston.
Federal Open Market Committee members at the gathering that ended Aug. 1 indicated monetary easing will be needed “fairly soon” unless there are signs of a durable economic pickup, the minutes released yesterday showed. Many participants said a new large-scale asset-purchase program “could provide additional support for the economic recovery.”
“The market moved higher on the Fed minutes, which didn’t signal much,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Additional stimulus is no more likely than before.”
People’s Bank of China Governor Zhou Xiaochuan said in Beijing yesterday that rate and reserve requirement adjustments are possible. Zhou’s comments left the door open for further stimulus. Chinese Premier Wen Jiabao said last week that easing inflation allows more room to adjust monetary policy.
The U.S. and China are the world’s biggest oil-consuming countries, accounting for a combined 32 percent of world demand, according to BP Plc (BP/)’s Statistical Review of World Energy. The 27 members of the European Union were responsible for 16 percent of global oil use in 2011, BP said.
Tropical Storm Isaac was 165 miles (265 kilometers) south of San Juan, Puerto Rico, the Miami-based center said in an advisory at 2 p.m. East Coast time. The storm, which may reach southern Florida on Aug. 27, is forecast to strengthen over the next two days and could become a hurricane.
Electronic trading volume on the Nymex was 439,032 contracts as of 4:12 p.m. in New York. Volume totaled 428,683 contracts yesterday, 21 percent below the three-month average. Open interest was 1.49 million.
To contact the editor responsible for this story: Dan Stets at email@example.com