- November 7th, 2011
Oil Falls From Three-Month High on Signs of European Instability
Oil declined in New York, falling from a three-month high as European equity markets declined and the euro weakened against the dollar amid concern that political instability in the region may undermine demand.
Futures dropped as much as 0.8 percent amid speculation that Italian Prime Minister Silvio Berlusconi will struggle to keep a majority, after Greek Prime Minister George Papandreou agreed to step down. The Stoxx Europe 600 index fell as much as 1.8 percent while the dollar gained 0.7 percent against the euro, reducing the appeal of commodities priced in the U.S. currency.
“The worry is about global activity levels going forward if the crisis spreads to Italy,” Ole Hansen, senior manager of trading advisory at Saxo Bank A/S in Copenhagen, said by phone. “People are getting really worried about whether the Italians can put through the reforms that are needed” to help keep European economies from sliding into recession.
Oil for December delivery was down 40 cents, or 0.4 percent, at $93.86 a barrel in electronic trading on the New York Mercantile Exchange at 9:47 a.m. London time, after rising as high as $94.96, the highest price since Aug. 2.
Crude in New York gained for a fifth week in the five trading days ended Nov. 4, the longest rising streak since the period ended April 3, 2009. Prices are up 2.7 percent this year.
Brent crude for December settlement was up 13 cents at $112.10 a barrel. The European benchmark contract was at a premium of $18.24 to New York crude, compared with $17.71 on Nov. 4 and a record settlement of $27.88 on Oct. 14.
European finance chiefs will meet in Brussels today to work on details of a plan to bulk out the region’s bailout fund. Investor concern that Italy will struggle to cut the region’s second-biggest debt load sent the yield on the nation’s 10-year bond to about 6.4 percent on Nov. 4. Italy’s parliament votes tomorrow on the 2010 budget report as two Berlusconi allies defected to the opposition last week and a third quit yesterday.
In Greece, Papandreou agreed to step down to allow the creation of a unity government to receive international aid and avert a collapse of the country’s economy.
Oil prices gained last week amid signs the global economy may withstand Europe’s debt crisis. The U.S. unemployment rate fell to 9 percent last month, the lowest since April, the Labor Department reported Nov. 4. Chinese manufacturing continued to expand in October, based on an index compiled by the China Federation of Logistics and Purchasing.
The U.S. is the world’s biggest oil consumer, using 19.1 million barrels a day in 2010, or 21 percent of global consumption, according to BP Plc’s Statistical Review. China is the second largest, accounting for about 11 percent and the European Union used 16 percent.