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Oil Falls to Lowest in a Week on Asian Demand, European Crisis

Oil fell for a third day to its lowest price in more than a week in New York on concern that Europe’s debt crisis and slower Asian economic growth will curtail fuel demand.

Futures dropped as much as 2.1 percent to their lowest since Nov. 10. European stocks have lost 18 percent this year as surging borrowing costs for governments raise the risk of recession. Japan, the world’s third-biggest crude consumer, reported the first drop in exports in three months. Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih said the world economy is at risk of a double-dip recession amid sovereign debts and weak U.S. growth.

“Fear that something really bad could happen in Europe, hence demand could fall, has been the main reason prices have been so subdued,” Amrita Sen, an analyst with Barclays Capital in London, said in an interview Sen with Owen Thomas on Bloomberg Television’s “Countdown.”

Crude oil for January delivery fell as much as $2.06 to $95.61 a barrel in electronic trading on the New York Mercantile Exchange and was at $96.41 a barrel at 12:48 p.m. London time. Front-month prices dropped 1.6 percent last week and are 5.5 percent higher this year.

Brent oil for January settlement was at $106.76 a barrel, down 80 cents on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas crude increased to $10.25 from $9.89 on Nov. 18. The spread reached a record high of $27.88 on Oct. 14.

Oil Rally

Investors should be “cautious” about a rally in oil prices last week, Sen said. New York futures surged 3.2 percent to settle at $102.59 a barrel Nov. 16 after Enbridge Inc. and Enterprise Products Partners LP said they would reverse the Seaway pipeline to bring crude to the U.S. Gulf Coast from Cushing, Oklahoma, where there is a supply bottleneck.

“You need a lot more pipelines to really alleviate the problem,” Sen said. “It’s one pipeline that’s been reversed and if you look at the other pipeline projects that were supposed to come online, they’ve all been canceled.”

Saudi Arabian Oil Minister Ali Al-Naimi said today in Riyadh he is “very happy” with current crude prices. October oil output in Saudi Arabia, OPEC’s biggest producer of crude, was 9.4 million barrels a day, similar to September, he said yesterday. The Organization of Petroleum Exporting Countries meets Dec. 14 to decide whether to change output quotas.

“December will be a very comfortable meeting,” OPEC Secretary-General Abdalla el-Badri told reporters in Riyadh. “You will not see the friction that you saw last time.”

Japan Exports

Prices retreated after Japan’s Ministry of Finance said exports fell 3.7 percent in October from a year earlier. The median estimate of 29 economists surveyed by Bloomberg News was for a 0.3 percent decline.

“The market got ahead of itself a little too quickly,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney. “There are still issues in Europe.”

Hedge-fund managers and other large speculators increased their net-long position in New York crude futures in the week ended Nov. 15, the Commodity Futures Trading Commission said.

Managed-money bets that prices will rise, in futures and options combined, outnumbered short positions by 216,075 futures, the Washington-based regulator said in its Nov. 18 weekly Commitments of Traders report. Net long positions rose by 12,110 contracts, or 5.9 percent, from a week earlier.

The London-based ICE exchange said today hedge-funds and other money managers cut net-long positions bets on Brent crude by 647 contracts, or 1 percent, in the week ended Nov. 15.

Their speculative bets that Brent prices will climb, in futures and options combined, outnumbered short positions by 62,879 lots, the exchange said in its weekly Commitment of Traders report. Net-long positions were at 63,526 contracts in the week to Nov. 8.

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