Crude oil fell to a nine week low in New York as the euro dropped against the dollar on concern that Greece’s debt crisis will spread, curbing economic growth. Oil has lost 8 percent since May 3, the steepest three day decline since July 2009, as the dollar surged versus the common currency, reducing the appeal of commodities as an alternative investment. Moody’s placed its Aa2 rating for Portugal on review for a possible downgrade, a process that will conclude within three months, the company said in a statement yesterday.
“The oil market is being hit by a double whammy,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas based energy consultant. “The rise in the dollar is pummeling crude. Also, there are global growth concerns which have increased because of the credit downgrades in Europe and the Greek debt crisis.” Crude oil for June delivery fell 71 cents, or 0.9 percent, to $79.26 a barrel at 9:58 a.m. on the New York Mercantile Exchange. Futures touched $78.24, the lowest level since March 1. Prices have climbed 41 percent in the past year.
Brent oil for June settlement declined 56 cents, or 0.7 percent, to $82.05 a barrel on the London based ICE Futures Europe exchange. The contract touched $81.12, the lowest level since March 31. The euro dropped 0.5 percent to $1.2748 from $1.2814 yesterday. The common currency touched $1.2691, the weakest level since March 2009.
Standard & Poor’s last month downgraded Greece’s debt to junk and followed with cuts to Portugal and Spain.
‘Mass Exodus’
“You’re starting to see a mass exodus as people are expecting more problems from the European debt crisis,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. U.S. stockpiles of crude oil rose 2.76 million barrels last week to the highest level since June, an Energy Department report showed yesterday. It was the 13th gain in 14 weeks.
Crude oil inventories at Cushing, Oklahoma, where the New York traded West Texas Intermediate grade is stored, rose 4.9 percent to 36.2 million barrels, the highest level since the department began reporting on supplies at the hub in April 2004. Oil for June delivery is at a $3.13 a barrel discount to the July contract in New York, the widest spread in more since Feb. 17, 2009. December crude is trading at a $7.08 premium to the front contract.
Reporter Mark Shenk can be contacted at mshenk1@bloomberg.net
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