Oil fell for a sixth day in New York, heading for its third weekly decline, on concern demand will falter as Europe’s debt crisis worsens and the U.S. economy slows. Brent crude was at the narrowest premium to West Texas Intermediate in two weeks after a pipeline was reversed.
Futures slid as much as 1 percent after closing at the lowest price in more than six months yesterday. Greece was downgraded by Fitch Ratings, while Moody’s Investors Service cut 16 Spanish banks and manufacturing in the Philadelphia region unexpectedly shrank in May. Enbridge Inc. and Enterprise Products Partners LP reversed the Seaway pipeline to alleviate a glut in the U.S. Midwest.
“The commentary out there still suggests we’ve got a bearish tone,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “Everyone is still concerned about what’s happening in Europe and that adds to the demand destruction. It’s still mixed data from the U.S., there’s nothing clean coming out.”
Crude for June delivery fell as much as 96 cents to $91.60 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.08 at 2:56 p.m. Singapore time. The contract yesterday slipped 25 cents to $92.56, the lowest close since Nov. 2. Prices are 4.2 percent lower this week and down 6.8 percent this year.
Brent oil for July settlement dropped 56 cents, or 0.5 percent, to $106.93 a barrel on the London-based ICE Futures Europe exchange. The premium of the European benchmark contract to WTI for the same month was at $14.47, compared with $14.55 yesterday, the lowest gap since May 3.
Oil in New York has long-term technical support at $89.93 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 50 percent Fibonacci retracement of the intraday decline to $32.40 in December 2008 from a record high of $147.27 in July that year. Buy orders tend to be clustered near chart-support levels. Futures last traded at that price in November 2011.
Greece’s credit rating was downgraded one level by Fitch on concern the country won’t be able to muster the political support needed to sustain its membership in the euro area. Nine Spanish lenders were cut three notches and seven were kept on review for further reductions, Moody’s said yesterday in a statement, citing a recession and mounting loan losses.
The Federal Reserve Bank of Philadelphia’s general economic index slid to minus 5.8 this month, the lowest reading since September, from 8.5 in the previous month. The decline was the first in eight months. Economists forecast the gauge would rise to 10, according to a Bloomberg News survey.
Brent’s premium to WTI narrowed as the reversal of the 500-mile (880-kilometer) Seaway pipeline was prepared. Enbridge and Enterprise plan to start moving oil from Cushing, Oklahoma, to Houston-area refineries this weekend, they said in a statement yesterday.
The startup may ease a glut at Cushing, the delivery point for WTI, where inventories rose 1 million barrels last week to a record 45.1 million, according to Energy Department data. The line will initially be able to deliver 150,000 barrels per day, increasing to more than 400,000 in the first quarter of 2013, the companies said.
New York oil is still poised to decline next week as the reversal of Seaway may not be enough to alleviate the buildup of supplies in the central U.S., according to a Bloomberg News survey. Nineteen of 34 analysts, or 56 percent, forecast prices will drop through May 25. Nine respondents predicted futures will rise and six estimated they will be little changed.