Crude oil dropped to the lowest price in four months in New York on doubts European efforts to resolve the Greek debt crisis will succeed, and on concern of reduced economic growth and fuel demand.
Futures fell 2 percent as Greek Prime Minister George Papandreou attempted to get the country’s parliament to pass austerity measures needed for a bailout. The International Monetary Fund cut its forecast for U.S. growth in 2011. Oil tumbled 6.3 percent this week as U.S. manufacturers turned pessimistic and fuel consumption dropped.
“There are still a lot of questions about the Greek bailout and what that will mean for the demand picture,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The oil market seems more skeptical about the debt crisis than the equity market. A lot of technical damage was done to the market this week.”
Crude oil for July delivery dropped $1.94 to $93.01 a barrel on the New York Mercantile Exchange, the lowest settlement price since Feb. 18. Today’s move capped the biggest weekly decline in six weeks.
Brent oil for August delivery declined 81 cents, or 0.7 percent, to end the session $113.21 a barrel on the London-based ICE Futures Europe exchange. The price is 44 percent higher than a year ago.
Oil in New York traded in a $10 range for more than five weeks until this week. Futures stayed between $95.02 and $104.60 from May 9 through June 14. The contract dipped below the 200-day moving average of $92.22 in intraday trading today for the first time since September.
“Oil has broken important support this week,” said Peter Beutel, the president of Cameron Hanover Inc., an energy advisory company in New Canaan, Connecticut. “We may be on course to test $85.”
Greek Rescue Plan
Futures pared losses earlier when German Chancellor Angela Merkel moderated previous conditions for supporting a Greek rescue plan. European finance ministers next meet on Greece in Luxembourg on June 19 and June 20, followed by a Brussels summit of European Union leaders June 23 and June 24.
U.S. oil supplies rose to the highest level in 31 years for the month of May as refineries processed less crude amid a decline in gasoline demand, according to the American Petroleum Institute. Inventories increased for a fifth consecutive month to 367.6 million barrels, a record in data going back to 1980, the industry-funded group said today in a monthly report.
“We still aren’t sure about the economic consequences of the Greek debt crisis for Europe,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Commodity markets are still pricing in the negative economic outlook.”
The IMF cut its U.S. growth projection, warning of further setbacks to the economic recovery, along with potential contagion from the European debt crisis.
The U.S. economy will grow 2.5 percent this year and 2.7 percent in 2012, down from the 2.8 percent and 2.9 percent projected in April, the IMF said today, citing higher commodity prices and bad weather in the first quarter and a weak housing market. The Washington-based fund sees the world economy expanding 4.3 percent this year, down from 4.4 percent in April.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment in the U.S. fell to 71.8 in June from 74.3 a month earlier. The gauge was projected to slip to 74, according to the median estimate of 67 economists in a Bloomberg News survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.
Chinese retail sales growth slowed to 16.9 percent in May, less than the average of the past five years and a figure that’s inflated by soaring prices for food, according to government data released this week.
The U.S. and China were responsible for 32 percent of global oil demand in 2010, according to BP Plc’s Statistical Review of World Energy on June 8.
Libyan leader Muammar Qaddafi refuses to step down, a Russian envoy said after talks with government officials, including Prime Minister Baghdadi Mahmudi, in Tripoli. A rebellion has cut production in the North African country by almost 90 percent, according to Bloomberg estimates.
“The prime minister said Qaddafi doesn’t intend to resign,” Mikhail Margelov said by phone from Tunis, the capital of neighboring Tunisia, a day after meeting with the Libyan officials. “For the government of Tripoli, they aren’t prepared to discuss the future of Qaddafi.”
Oil volume in electronic trading on the Nymex was 629,070 contracts as of 3:36 p.m. in New York. Volume totaled 692,012 contracts yesterday, 3.9 percent above the average of the past three months. Open interest was 1.55 million contracts.