Jan. 4 (Bloomberg) -- Oil fell from its highest settlement in almost eight months on signs that Europe’s debt crisis may drag the region into a recession, curbing fuel consumption.
West Texas Intermediate crude futures reversed gains as the euro dropped from near a one-week high against the dollar after European reports showed services and manufacturing output contracted and inflation slowed. German 10-year bonds stayed lower after the country sold additional securities. Oil rallied 4.2 percent yesterday as the head of Iran’s army warned the U.S. against sending an aircraft carrier back to the Persian Gulf.
“The stronger dollar versus euro may be exerting short-term downward pressure,” said Christopher Bellew, a senior broker Jefferies Bache Ltd. in London, who predicts oil prices will rebound. “The overall trend remains upwards, although it has for the moment hit short-term resistance.”
Crude for February delivery was at $102.25 a barrel in electronic trading on the New York Mercantile Exchange, down 71 cents, at 12:43 p.m. London time. Yesterday, the contract rose $4.13 to $102.96 a barrel, the highest settlement since May 10. Prices climbed 8.2 percent in 2011, their third annual gain.
Brent oil for February settlement on the London-based ICE Futures Europe exchange was at $111.66 a barrel, 47 cents lower, after advancing 4.4 percent yesterday. The European benchmark contract was at a $9.38 premium to New York-traded West Texas Intermediate grade. The spread was a record $27.88 on Oct. 14.
Crude inventories probably dropped 500,000 barrels last week, according to a Bloomberg News survey before an Energy Department report tomorrow.
U.S. gasoline inventories probably climbed 1 million barrels last week, according to the median estimate of eight analysts surveyed by Bloomberg News. Distillate-fuel supplies, including diesel and heating oil, probably rose 500,000 barrels.
The American Petroleum Institute will release its inventory data today. The industry group collects stockpile figures on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
“We’re positive on oil prices,” said Gareth Lewis-Davies, an analyst at BNP Paribas SA in London. “Whatever happens week to week, there’s scope for inventories to tighten. The price moves have been tied to Iranian tensions, investor risk appetite and the dollar.”
Strait of Hormuz
Oil has risen on speculation Iran may try to disrupt supplies through the Strait of Hormuz as the U.S. and its allies increase pressure to halt what they say may be a covert nuclear-weapons program. Sanctions signed into law Dec. 31 by President Barack Obama aim to deter dealings with Iran’s central bank. Almost 17 million barrels a day of crude moved through the waterway last year, according to the U.S. Energy Department.
Ataollah Salehi, the head of Iran’s army, said yesterday the U.S. shouldn’t send an aircraft carrier back to the Gulf and that “we warn only once,” according to the state-run Fars news agency. The USS John C. Stennis passed through the strait on Dec. 27 on a routine voyage and was operating in the northern Arabian Sea, said the U.S. 5th Fleet.
The Organization of Petroleum Exporting Countries’ crude production rose to the most since November 2008 last month, led by a recovery in Libyan supply, according to a Bloomberg survey. Output increased 162,000 barrels, or 0.5 percent, to an average 30.667 million barrels a day from a revised 30.505 million, the survey of oil companies, producers and analysts showed. OPEC’s 12 members pump about a third of the world’s crude.
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