Oil down - US growth, Greek default concern
Oil fell in New York amid concern that Europe_s sovereign debt situation may weaken fuel demand. The dollar rose to a...
Oil fell in New York amid concern that Europe_s sovereign debt situation may weaken fuel demand. The dollar rose to a nine-week high against the euro.
Futures slid as much as 3 percent after Spain_s governing Socialist party suffered its worst electoral defeat in more than 30 years and Standard & Poor_s said on May 20 it may lower Italy_s credit rating. The Dollar Index climbed to its highest in more than nine weeks as declining Asian stocks spurred demand for safer assets.
_External macro factors, especially the strength of the U.S. dollar and the negative start of the week in Asian equities, have weakened commodities,_ said Eugen Weinberg, an analyst at Commerzbank AG. _The dollar is higher against the euro because of worries about Europe_s debt._
Crude for July delivery lost as much as $2.99 to $97.11 a barrel in electronic trading on the New York Mercantile Exchange. It was at $97.24 at 10:42 a.m. London time.
Brent crude for July settlement on the London-based ICE Futures Europe exchange fell as much as $3.26, or 2.9 percent, to $109.13 a barrel. On May 20, the contract climbed 97 cents, or 0.9 percent, to $112.39.
The euro weakened by 1.35 percent against the dollar to $1.3970, the lowest since March 16. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, rose to 76.366, the strongest since March 16. A stronger dollar reduces the appeal of commodities as an alternative to the U.S. currency.
Greek Bonds Plunge
Greek Prime Minister George Papandreou is scheduled to brief his Cabinet today on budget cuts and asset sales to keep European aid. Greek government bonds plunged May 20, driving 10- year yields to a euro-era high, on speculation the nation won_t be able to avoid reorganizing its debt. The spread, or yield difference, between the 10-year bonds and similar-maturity German bunds widened to a record. Fitch cut Greece_s credit rating to B+ from BB+, four notches below investment grade.
_This past week was fraught with concern that Greece and Spain_s persistent debt problems could affect global markets,_ John Caiazzo, president of Acuvest Commodity Brokers Inc. in Temecula, California, said in a note to clients. _We continue to favor the short side for an eventual move for nearby futures crude to the $80 to $85 price level._
Consumer Spending Cools
U.S. consumer spending probably cooled in April amid higher fuel prices, a Bloomberg News survey showed before a government report this week.
Hedge funds cut bullish bets on oil in New York as the dollar strengthened amid an exodus from commodities. The funds and other large speculators reduced so-called net long positions, or wagers on rising prices, by 13 percent in the seven days ended May 17, according to the Commodity Futures Trading Commission_s Commitments of Traders report. They dropped to the lowest level since the week ended Feb. 15, when the resignation of Hosni Mubarak as Egypt_s president sent oil to an 11-week low, the May 20 report showed.
In Iceland, a volcanic eruption is abating after forcing the country_s main international airport to close, the second such disruption in 13 months to the island nation_s air traffic.
_Prices are on a downwards trend on the back of renewed Icelandic volcano fears, ongoing European debt miasma and potentially also the latest CFTC data,_ analysts led by David Wech at Vienna-based researcher JBC Energy GmbH said in a note.
Wild Card
An eruption at Eyjafjallajokull on April 14, 2010, closed European airspace for six days, grounding 100,000 flights at a cost of $1.7 billion, according to an estimate then by the International Air Transport Association.
_The volcano in Iceland is still a wild card,_ Bjarne Schieldrop, chief commodity analyst at SEB AB, Sweden_s third- biggest bank by market value, said in a report today.
Economic reports indicated the U.S. economic recovery is sputtering and fuel demand may drop. The index of U.S. leading indicators slipped in April after nine months of increases. Manufacturing in the Philadelphia area grew in May at the slowest pace in seven months and April existing home sales fell.
Consumer spending probably cooled in April as higher food and fuel prices forced Americans to cut back on other items, economists said a government report May 27 will show. Purchases probably increased 0.5 percent, the smallest gain in three months, after climbing 0.6 percent in March, according to the median of 66 estimates in a Bloomberg News survey.