Oil traded below $80 a barrel for a third day in New York amid concern that Europe’s debt crisis will curb demand for fuels.
Futures slid as much as 1.2 percent as George Soros warned that a failure by European Union leaders meeting this week to produce drastic measures could spell the demise of the bloc’s shared currency. Developed economies are running into the limits of monetary policy, the Bank for International Settlements said in its annual report yesterday. Oil earlier rose as much as 1.2 percent after Tropical Storm Debby approached oil and gas installations in the Gulf of Mexico.
“The outlook for oil remains negative while concerns remain about the economic outlook in Europe weigh on demand,” Michael Hewson, a London-based analyst at CMC Markets, which handles about $240 million a day in U.S. crude contracts, said today in an e-mail. “Investors remain skeptical that EU leaders will be able to agree on anything tangible to alleviate the current crisis.”
Oil for August delivery dropped as much as 97 cents to $78.79 a barrel in electronic trading on the New York Mercantile Exchange and was at $78.92 at 12:53 p.m. London time. Prices have fallen 23 percent this quarter, the biggest decline since the final three months of 2008.
Brent oil for August settlement slid 95 cents, or 1 percent, to $90.03 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $11.09, compared with $11.22 on June 22.
Hedge funds reduced bullish oil bets in the seven days ended June 19, according to the Commodity Futures Trading Commission’s Commitments of Traders report on June 22. Money managers, including funds, commodity pools and commodity trading advisers, cut wagers for a seventh week, paring futures and options combined by 5.9 percent to 122,815, the lowest level since Oct. 1, 2010.
Monetary policy only “buys time” in the short run for political leaders to act, and leaving an easy stance for a prolonged period poses economic risks, the Basel, Switzerland-based BIS said in its report published yesterday.
Central bank balance sheets now contain $18 trillion of assets, or about 30 percent of global gross domestic product, double the ratio of a decade ago, and interest rates are as “low as they can go,” it said.
The EU begins a two-day meeting in Brussels on June 28. Leaders will attend pre-summit meets as they work to narrow differences on solutions to the debt crisis.
Oil gave up earlier gains after Tropical Storm Debby shifted away from offshore energy installations. Companies including ConocoPhillips and BP Plc shut about 23 percent of output in the Gulf, the U.S. Bureau of Safety and Environmental Enforcement said at the weekend.
Debby was in the Gulf of Mexico, about 90 miles (145 kilometers) south-southwest if Apalachicola, Florida, with top winds of 50 miles per hour, the National Hurricane Center said in an advisory shortly before 8 a.m. New York time.
Little movement or change in strength is expected through at least today, the center said.
Norwegian offshore workers shut two production platforms after talks on pensions and wages failed, curtailing output in Europe’s second-largest oil and natural-gas producer.
The strike will cut oil and gas output at Statoil ASA’s Oseberg and Heidrun fields, and close BP’s Skarv development, the Norwegian Oil Industry Association said yesterday.
The strike by oil-platform workers, which is the first industry-wide action since 2004, targets about 165,000 barrels of oil equivalent a day, according to the Industry Energy and Lederne unions.