Oil dropped from a three-week high as euro-area finance ministers refused to approve a rescue package for Greece, boosting concern that the European debt crisis will reduce fuel demand.
Futures fell 1.2 percent after Luxembourg Prime Minister Jean-Claude Juncker, chairman of the group of euro-area finance chiefs, said yesterday that Greece won’t get financial aid until it implements an austerity plan. The International Energy Agency also cut its 2012 global oil demand forecast for a sixth month, citing a “darkening” economic outlook.
“The market rallied earlier this week on signs that the Greek situation was about to be settled and is now giving back those gains,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The longer this crisis continues, the more it will diminish European economic growth and along with that the oil demand outlook.”
Crude oil for March delivery decreased $1.17 to settle at $98.67 a barrel on the New York Mercantile Exchange. The contract rose for a third day yesterday, climbing 1.1 percent to $99.84, the highest close since Jan. 19. Prices increased 0.8 percent this week and are up 14 percent in the past year.
Brent oil for March settlement fell $1.28, or 1.1 percent, to end the session at $117.31 a barrel on the London-based ICE Futures Europe exchange. It was the first decline in nine days, ending the longest stretch of moves higher since October 2009. The European benchmark contract’s premium to New York-traded West Texas Intermediate crude was at $18.64, 11 cents narrower than yesterday’s settlement.
The euro retreated from a two-month high against the dollar before a Greek parliamentary vote on austerity measures this weekend that Greek Finance Minister Evangelos Venizelos said amounted to a referendum on euro membership.
George Karatzaferis, the leader of one of three parties supporting Greek Prime Minister Lucas Papademos, said he wouldn’t support the austerity plan. He spoke hours after German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece was missing debt targets.
The Standard & Poor’s GSCI Index dropped as much as 1 percent. Twenty of the 24 raw materials on the index declined. A weaker euro and rising dollar reduce the appeal of commodities as an alternative investment.
“The markets can turn on a dime,” said Phil Flynn, vice president of research at PFGBest in Chicago. “If we get some headlines that the situation in Greece is hunky-dory, prices will run back up.”
The IEA cut its 2012 global oil demand forecast by 300,000 barrels a day from January’s estimate. The Paris-based agency predicted worldwide crude consumption will increase by 800,000 barrels a day to 89.9 million barrels a day in its monthly oil market report today.
Demand will drop in member nations of the Organization of Economic Cooperation and Development this year as Europe’s sovereign debt crisis slows growth, according to the IEA.
“It’s a pretty remorseless picture of decline for oil demand throughout the OECD,” David Fyfe, head of the agency’s market and industry division, said in a telephone interview from Paris. “These are mature markets, in which industry recovery is stuttering, and moving into recession in the case of Europe.”
The Organization of Petroleum Exporting Countries produced 30.9 million barrels a day of crude oil last month, the most since October 2008, the Paris-based IEA said. That’s up from a revised 30.82 million barrels in December.
China’s exports fell 0.5 percent in January as trade was disrupted by the Lunar New Year holiday, which ran from Jan. 22 to Jan. 28 this year. Imports dropped 15.3 percent.
In January, Chinese oil imports surged to a record. Shipments from overseas rose 7.4 percent from a year earlier to 23.41 million metric tons, or about 5.54 million barrels a day, according to preliminary data today on the website of the Beijing-based General Administration of Customs.
The International Monetary Fund said in a Feb. 6 report that China’s economic expansion may be cut almost in half from its 8.2 percent estimate this year if Europe’s debt crisis worsens, a scenario that would warrant “significant” fiscal stimulus from the government.
“Concern about Chinese economic growth and the situation in Greece are raising worries that the global economy may be headed for a slowdown,” Flynn said.
Confidence among U.S. consumers fell more than forecast in February. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 72.5 from 75 in January. The median estimate in a Bloomberg News survey called for 74.8.
The U.S. and China, the two biggest oil-consuming countries, were responsible for 32 percent of global oil use in 2010, according to BP Plc’s Statistical Review of World Energy released on June 8. The European Union’s 27 members accounted for 16 percent of world demand in 2010, BP figures show.
Oil volume in electronic trading on the Nymex was 563,385 contracts as of 4:06 p.m. in New York. Volume totaled 669,719 yesterday, 10 percent above the three-month average. Open interest was 1.48 million contracts.