Oil Falls to 7-Week Low on Italian Election
West Texas Intermediate oil fell to the lowest level in seven weeks in electronic trading after the settlement as partial election results in Italy heightened concern that the euro-zone debt crisis may deepen.
Prices dropped as much as 1.1 percent as U.S. stocks tumbled and the euro weakened against the dollar. Early election results showed Italy may be left with a divided parliament, spurring concern that renewed turmoil in European markets will crimp global growth. Oil also fell as U.S. Secretary of State John Kerry signaled that a diplomatic solution to a standoff over Iran’s nuclear program is possible.
“The markets don’t like uncertainty,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending. “It’s indicative that the euro-zone crisis is not over yet and there is still a lot of headwind.”
WTI for April delivery fell $1.02, or 1.1 percent, to $92.11 a barrel at 5:01 p.m. in electronic trading on the New York Mercantile Exchange. It touched $92.07, the lowest level in intraday trading since Jan. 4. Futures settled down 2 cents at $93.11 a barrel after the close of floor trading. The volume of all futures traded was 11 percent below the 100-day average at 4:49 p.m.
Brent for April settlement dropped 66 cents, or 0.6 percent, to $113.44 a barrel. Brent closed up 34 cents at $114.44 on the London-based ICE Futures Europe exchange. Volume was 12 percent below the 100-day average. The European benchmark crude was at a premium of $21.33 to WTI at the settlement, up from $20.97 on Feb. 22.
Italy may require another election after the four-way race that ended today. Forecasts by state broadcaster RAI showed Pier Luigi Bersani, the Democratic Party candidate, winning the lower chamber of parliament, and Silvio Berlusconi with a blocking minority in the Senate. Bersani, who led in opinion polls throughout the two-month race, campaigned to maintain the budget rigor of outgoing Prime Minister Mario Monti.
“Those projections show a risk of ungovernability,” Stefano Fassina, economic-policy spokesman for Bersani, said today on Italy’s La7 television.
The Standard & Poor’s 500 Index fell 1.8 percent after climbing as much as 0.7 percent. The euro was down 0.9 percent against the dollar after rising 0.9 percent to $1.3319. A weaker euro and stronger dollar curb oil’s appeal as an investment alternative.
“Things completely changed throughout the day,” Correll said. “It’s a pretty sharp reversal for everything.”
Futures also dropped as the U.S. and its partners urged Iran to accept what they call a “good and updated offer” in exchange for a step-by-step lifting of sanctions on oil exports. Iran will hold talks with the U.S., China, France, Germany, Russia and the U.K. tomorrow in Kazakhstan, following an eight- month lapse in negotiations.
“A window for a diplomatic solution is open” with Iran, Kerry told a news conference in London after talks with U.K. Foreign Secretary William Hague. Iran should “negotiate in good faith” with world powers over its nuclear program, Kerry said.
The talks between Iran and the world powers, dubbed the P5+1 group, come following sanctions by the U.S. and the European Union that are costing Iran about $98.9 million a day in lost oil sales, data compiled by Bloomberg show.
“That kind of response from Kerry would be more bearish for oil,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “The market has turned its corner and it’s vulnerable to some further downside weakness.”
Iran says its nuclear program is for civilian energy and medical research. The U.S., other UN Security Council members and the European Union suspect a covert atomic weapons program.
“The fact that the West seems anxious to negotiate and Iran does not tells me that they’ll be less inclined to do a deal,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion.
Iran pumped 2.6 million barrels of oil a day in January, the lowest level since February 1990, a Bloomberg survey of oil companies, producers and analysts showed. Iran, the Organization of Petroleum Exporting Countries’ biggest producer after Saudi Arabia a year ago, is now tied with the United Arab Emirates for fifth place.
Electronic trading volume on the Nymex was 437,636 contracts as of 5:02 p.m. It totaled 395,138 contracts Feb. 22, 28 percent below the three-month average. Open interest was 1.65 million contracts.
To contact the editor responsible for this story: Dan Stets at