Tuesday July 12, 2011

Oil falls further to near US$94 in Asia Tuesday(update2)

SINGAPORE: Oil prices fell to near $94 a barrel Tuesday in Asia as a stronger U.S. dollar made commodities such as crude more expensive for investors with other currencies.

Benchmark oil for August delivery was down 69 cents to $94.46 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude fell $1.05 to settle at $95.15 on Monday.

In London, Brent crude fell 9 cents to $117.15 per barrel on the ICE Futures exchange.

The euro fell to $1.3953 on Tuesday from $1.4048 late Monday.

"The dollar may be getting ready to rally over an extended period," Cameron Hanover said in a report. "The bigger question is whether the oil market will follow the euro, as it has done for most of the last four years or so."

The euro has weakened in recent weeks amid concern that the Greek debt crisis could spread to Italy, Spain, Portugal and Ireland. On Monday, European officials disagreed over a second bailout package for Greece.

"The focus has shifted from Greece to Italy and it seems that one of the southern European countries is going to pose a problem," Cameron Hanover said.

In other Nymex trading in August contracts, heating oil fell 1.2 cents to $3.08 a gallon while gasoline dropped 1.2 cents at $3.06 a gallon. Natural gas futures added 0.7 cent at $4.30 per 1,000 cubic feet. - AP

Earlier report

Oil price falls on demand worries(update)

NEW YORK: The latest readings on Chinese inflation and renewed worries about European debt pushed oil lower.

Benchmark West Texas Intermediate crude fell $1.05 to settle at $95.15 per barrel Monday on the New York Mercantile Exchange. Brent crude, which is used to price many international oil varieties, dropped $1.09 to settle at $117.24 per barrel on the ICE Futures exchange in London.

Oil started falling after a weekend announcement that inflation in China hit a three-year high in June. China has been raising interest rates in an attempt to control inflation and cool off its economy, but on Saturday the government said consumer prices continued to increase, jumping 6.4 percent last month.

Rising consumer prices will heap even more pressure on the country's expanding economy, and that could affect energy demand. Oil has been climbing all year on the expectation that China will drive world oil demand.

Meanwhile, European officials disagreed over a second bailout package for Greece. Uncertainty about the country's debt problems raised concerns that the economic crisis could spread to Italy and Spain.

"You combine the debt crisis in Europe with those (Greek) austerity measures, and you get less spending and therefore less demand" for oil, analyst Andrew Lipow said.

The dollar shot up against other currencies, and that also weighed on oil futures. Oil, which is traded in dollars, tends to fall as the dollar strengthens and makes crude barrels more expensive for investors holding foreign money.

Anxiety about the future of the global economy fueled a sell-off on stock markets as well. The Dow Jones Industrial Average fell almost 180 points in afternoon trading. The Nasdaq and the Standard and Poor's 500 Index were down as well.

Given renewed economic concerns in Europe, some analysts wonder why oil hasn't dropped further. If it weren't such a hot commodity for hedge funds, money managers and other passive investors, oil would be much lower than it is now, Cameron Hanover analyst Peter Beutel said.

"Nothing I'm seeing suggests oil should be as high as it is," Beutel said.

Economists point out that oil will stay elevated as long as Libya's 1.5 million barrels of daily exports remain off the market due to the uprising there. Also, a slowdown in oil exploration in the Gulf of Mexico, unrest in other oil-rich nations like Yemen and expanding demand among developing nations will keep pushing prices higher this year.

Investment bank Barclays Capital said last week that benchmark oil should rise to an average $102 per barrel in the final three months of 2011. Chinese and Indian demand "remains highly strong" and "Latin America continues to be a source of demand strength," analyst Paul Horsnell said.

In other Nymex trading for August contracts, heating oil fell less than a penny to settle at $3.0875 per gallon and gasoline futures gave up 2.21 cents to settle at $3.0705 per gallon. Natural gas added 7.3 cents to settle at $4.277 per 1,000 cubic feet. - AP

Earlier report from print version

LONDON: Crude oil prices fell by more than a dollar yesterday as worries about the widening eurozone debt crisis and a drop in Chinese crude imports rekindled concerns about a demand slowdown.

After Friday's dismal US employment data, investors remain on edge about a meeting of top European officials on fears the crisis could spread to Italy, the region's third-largest economy.

By 0958 GMT, Brent crude futures for August fell by US$1.08 to US$117.25 a barrel, while US crude benchmark West Texas Intermediate (WTI) was US$1.14 lower at US$95.05 a barrel by the same time.

“Risk aversion is back after the disappointing US jobs data and concerns about the debt situation in Italy,” Commerzbank analyst Carsten Fritsch said. “This is putting oil prices under pressure, and it seems Brent in particular is vulnerable to further losses.” Reuters

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Tuesday July 12, 2011

Oil falls further to near US$94 in Asia Tuesday(update2)