Sunday, April 18, 2010

Crude Oil Extends Decline on Speculation Recovery in Demand Is Trailing Supply


Crude oil fell for a third day on speculation the commodity’s climb to an 18 month high have outpaced a recovery in global demand. Oil extended losses after tumbling 2.7 percent on April 16, the most in 10 weeks. Prices are being driven by speculation and currency movements and there’s no need for OPEC to review output before its October meeting, Qatar’s oil minister Abdullah bin Hamad al-Attiyah said yesterday. The dollar strengthened against the euro, reducing the appeal of commodities.

“We’ve still got higher than average stockpiles in various markets, including the U.S.,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. OPEC “will want to see those stockpiles drawn down further before they consider increasing supply.” Crude oil for May delivery fell as much as $1.58, or 1.9 percent, to $81.66 a barrel in electronic trading on the New York Mercantile Exchange. It was at $81.73 at 11:14 a.m. Singapore time. Prices have declined in eight of the nine trading days after touching $87.09 on April 6, the highest since October 2008.

The May contract, which expires tomorrow, lost $2.27 on April 16 to $83.24 a barrel, the biggest drop since Feb. 5. Prices slumped after the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of fraud, triggering a selloff in commodity and equity markets. The more widely held June future was down $1.30, or 1.5 percent, at $83.37 today.

Greece Bailout
The euro fell to a one week low against the dollar after European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions on a bailout package. The U.S. currency was at $1.3460 per euro at 10:40 a.m. in Singapore, from $1.3503 April 16 in New York. “There will be fits and starts to do with the recovery story and I think this Goldman news is another event that seems to have exposed the fragility of market confidence,” said CWA’s Hassall. “Longer term, the global recovery story is going to continue to drive the oil market.”

Oil at $90 a barrel would be harmful and may “jeopardize the market,” according to Angola’s oil minister, Jose Maria Botelho de Vasconcelos. A “good level” is between $70 and $80, he said yesterday at a gas conference in Oran, Algeria. Angola and Qatar are members of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil. The group slashed output by a record 4.2 million barrels a day beginning January 2009 to prevent a supply glut as the global economy sank into recession. Ministers voted to maintain official output targets at a March 17 meeting in Vienna.

Speculators
Hedge fund managers and other large speculators trimmed bets on rising oil prices for the first time in three weeks, U.S. Commodity Futures Trading Commission data showed.
Speculative net long positions, or the difference between orders to buy and sell the commodity on the New York Mercantile Exchange, decreased 12 percent to 113,364 contracts on April 13, the commission said last week. Brent crude oil for June settlement fell as much as $1.36, or 1.6 percent, to $84.63 a barrel on the London based ICE Futures Europe exchange. The contract was at $84.77 at 11:10 a.m. Singapore time.

Reporters Gavin Evans can be reached at gavinevans@bloomberg.net and Yee Kai Pin at kyee13@bloomberg.net


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