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Oil Trims Weekly Gain as Greek Risk Offsets U.S. Rebound Hopes

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Oil declined in New York, trimming a weekly advance, as protracted negotiations to resolve Greece’s debt crisis fanned concern that the region’s turmoil will harm fuel consumption.

West Texas Intermediate futures dropped as much as 0.9 percent as talks in Athens on debt swaps entered a third day, with Greek officials and private creditors struggling to agree on a plan. Still, prices are up 1.1 percent this week on signs of recovery in U.S. employment and manufacturing, and concern that tensions between Iran and Western nations will lead to a disruption in Middle East exports.

“The correlation between oil and the dollar is high this morning as the market awaits news about the fate of Greece,” said Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland.

Crude for February delivery fell as much as 95 cents to $99.44 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.81 at 1:12 p.m. London time. The contract, which expires today, fell 20 cents yesterday to $100.39, the lowest settlement since Jan. 13. The more-active March contract lost 60 cents to $99.94 today.

Brent oil for March settlement declined 27 cents, or 0.2 percent, to $111.28 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $11.34, compared with a record $27.88 on Oct. 14.

Persian Gulf Provocation

Iran’s ambassador to Russia said today that the U.S. Navy’s deployment in the Persian Gulf is a provocation.

“If Iran sees aggression from other countries, it will resist, defend itself with all its might,” Mahmoud-Reza Sajjadi said at a press conference in Moscow today.

U.S. Army General Martin Dempsey, the chairman of the U.S. Joint Chiefs of Staff, held talks with Israeli military and government officials and was scheduled to meet with President Shimon Peres and Prime Minister Benjamin Netanyahu to discuss efforts to curb Iran’s nuclear program.

Greek officials and private creditors are meeting for a third day to seek agreement on a debt swap. European officials and bondholders agreed in October to implement a 50 percent cut in the face value of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing borrowings to 120 percent of gross domestic product by 2020.

U.S. Economy

Applications for unemployment benefits in the U.S. dropped last week to the lowest level in almost four years, adding to signs that the world’s biggest consumer of crude is recovering. Manufacturing in the New York region expanded at the fastest pace in nine months, according to a separate report this week.

Initial jobless claims in the U.S. plunged by 50,000 to 352,000 in the week ended Jan. 14, less than forecast and the lowest level since April 2008, according to the U.S. Labor Department. Builders broke ground on 470,000 single-family houses at an annual rate, the most since April 2010, according to figures yesterday from the Commerce Department.

“The decent economic data that we’re seeing out of the U.S. is probably the major thing that’s propping up the positives,” said David Land, head of analysis at CMC Markets in Sydney. “There’s a fair bit of uncertainty, or risk, being priced into the market.”

Crude prices declined yesterday after the U.S. Energy Department said gasoline consumption dropped 2.2 percent to 8 million barrels a day last week, the lowest since the week ended Sept. 21, 2001. Motor fuel stockpiles rose 3.72 million barrels last week to 227.5 million, a 10-month high.

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