Oil fell as Spain’s economy contracted in the first quarter, putting the country into its second recession since 2009 and bolstering concern that fuel demand in the euro region will contract.
Front-month futures dropped for the first time in seven days after the Madrid-based National Statistics Institute said today that gross domestic product shrank 0.3 percent in the first three months of this year, the same as in the previous quarter. The decline in crude prices accelerated as the dollar rose against the euro on an increase in U.S. consumer spending.
“Concerns about Europe have been weighing on the market for a long time,” said Phil Flynn, an analyst at futures brokerage PFGBest in Chicago. “Today’s Spanish headlines are worrisome. The personal spending numbers here are a positive economic signal which pushed the dollar higher and as a result hit commodities.”
Crude oil for June delivery declined 6 cents to settle at $104.87 a barrel on the New York Mercantile Exchange. Prices climbed 1.8 percent this month and are up 6.1 percent this year.
Brent oil for June settlement slipped 36 cents, or 0.3 percent, to end the session at $119.47 a barrel on the London-based ICE Futures Europe exchange. Brent posted its first monthly drop since December.
The European benchmark contract settled at a premium of $14.60 to New York futures, the lowest level since April 17. It was $14.90 on April 27. The spread between the contracts surged to a record $27.88 on Oct. 14.
The European sovereign debt crisis that began in Greece and then moved to Ireland, Portugal, Italy and Spain has reduced economic growth in the euro region.
The dollar rose 0.1 percent versus the euro. A stronger U.S. currency decreases the appeal of raw materials as an investment.
Consumer spending in the U.S. climbed in March after the biggest gain since August 2009, indicating the largest part of the economy will help sustain the expansion. Incomes picked up.
Household purchases rose 0.3 percent after a revised 0.9 percent gain in February that was stronger than first reported, the Commerce Department said today in Washington.
Economic reports from the U.S. and Asia bolstered concern that global growth and fuel consumption will slow.
Business activity in the U.S. grew in April at the slowest pace since November 2009. The Institute for Supply Management-Chicago Inc. said its business barometer dropped to 56.2 in this month from 62.2 in March. Economists projected the gauge would fall to 60, according to the median of 55 estimates in a Bloomberg survey. Readings greater than 50 signal growth.
Taiwan’s economy expanded at the weakest pace since 2009 in the first quarter, and Singapore’s jobless rate unexpectedly rose in that period. Growth in South Korean industrial output eased in March, reports showed today.
Crude will range between $100 and $120 a barrel “for the time being,” Tony Hayward, chief executive of Genel Energy Plc and former BP Plc CEO, said in Istanbul while attending a Black Sea environmental conference.
“I don’t think prices will go beneath $100 because we see demand is growing in the world,” Hayward said. “I think oil prices will be range bound for the time being.”
Oil in New York reached $110.55 on March 1, the highest intraday level since May 4, amid speculation that Western sanctions aimed at halting Iran’s nuclear program would disrupt Middle East shipments. Prices have fallen 5.1 percent from that peak since tension has eased.
“The noises from Iran have been a bit friendlier, so we’ve seen the geopolitical premium ease,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
New York oil’s April trading range was the tightest for any month in 17 years as concern eased that supplies would be disrupted and reports showed slower U.S. economic growth.
Electronic trading volume of crude oil on the Nymex was 361,542 contracts as of 4:15 p.m. in New York. Volume totaled 335,862 contracts April 27, 46 percent below the three-month average and the lowest level since March 26. Open interest was 1.57 million.
“There’s not a lot of repositioning going on in the market,” Evans said. “The price movement has narrowed and trading volume is down.”
Money managers, including hedge funds, commodity pools and commodity trading advisers, cut bullish oil wagers by 2,878, or 1.4 percent, to 196,426 futures and options combined in the seven days ended April 24, according to the Commodity Futures Trading Commission’s Commitments of Traders report on April 27.