Tuesday, August 2, 2011

Oil Slides a Fourth Day as U.S. Spending Drops, Moody’s Warns of Downgrade

Oil declined for a fourth day in New York, its longest losing streak since May, as investors bet that signs of a slowing U.S. economy indicate fuel demand will falter in the world’s biggest crude-consuming nation.

Futures slipped as much as 0.7 percent today after U.S. consumer spending unexpectedly fell in June for the first time in almost two years. Moody’s Investors Service said the nation’s credit rating may be downgraded on concerns that fiscal discipline will ease, further debt reduction measures won’t be adopted and the economy will weaken. Oil is also declining after breaching a technical support level.

“The economic numbers are reflecting that demand is weak in the U.S.,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts oil will average $100 a barrel this year. “Prices could come back to the $90 level, if not more.”

Crude for September delivery dropped as much as 69 cents to $93.10 a barrel in electronic trading on the New York Mercantile Exchange, and was at $93.42 at 1:15 p.m. Sydney time. It’s the longest losing streak since the five days of declines to May 6. The contract yesterday slid $1.10 to $93.79. Prices are 13 percent higher the past year.

Brent oil for September settlement declined 52 cents, or 0.5 percent, to $115.94 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.54 to U.S. futures, compared with a record close of $22.67 yesterday.
Moving Average

Oil is extending losses in New York after dropping below the 200-day moving average yesterday, a long-term support level at about $95 a barrel, according to data compiled by Bloomberg. A breach of technical support usually means prices will continue to fall. Front-month futures may decline to the lower Bollinger Band, around $91.11 today.

U.S. spending dropped 0.2 percent in June, Commerce Department figures showed yesterday. The median estimate of 77 economists surveyed by Bloomberg News called for a 0.1 percent increase. Incomes grew at the slowest pace since November.

The odds of another economic downturn are rising amid cutbacks in spending by consumers and the government, according to five of the nine members of the U.S. panel that dates recessions, the Business Cycle Dating Committee of the National Bureau of Economic Research.

The U.S. probably failed to create enough jobs in July to reduce unemployment. Payrolls probably climbed by 85,000 workers after an 18,000 increase in June that was the smallest this year, according to the median forecast of 81 economists surveyed by Bloomberg News before a Labor Department report Aug. 5.
Oil Supplies

“Commodity investors are expected to remain cautious ahead of this Friday’s U.S. jobs report,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. The bank estimates oil in New York will average $100 a barrel in the third quarter. Prices fell “as investors focused on the weaker state of the U.S. economy and softer demand,” he said.

U.S. crude stockpiles declined 3.31 million barrels last week to 354.9 million, according to the industry-funded American Petroleum Institute. An Energy Department report today may show inventories climbed 1.5 million barrels, the median of 14 analyst estimates in a Bloomberg News survey shows.

Gasoline supplies increased 2.55 million barrels to 212.2 million, the American Petroleum Institute said. The Energy Department report may show they rose 250,000 barrels, according to the Bloomberg News survey.
Negative Outlook

The American Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. Oil-supply totals from the API and the department have moved in the same direction 71 percent of the time over the past year and 76 percent over the past four years.

The U.S., rated Aaa since 1917, was placed on negative outlook, New York-based Moody’s said in a statement today as it confirmed the rating. Moody’s warned on July 29 a negative outlook was “more likely” as lawmakers reduced the size of spending cuts being negotiated to win approval on a plan to lift the nation’s borrowing limit.

Tropical Storm Emily gained speed as it approached the Caribbean island of Hispaniola, where it should make landfall today and bring as much as 10 inches (25 centimeters) of rain, the U.S. National Hurricane Center said in an advisory released before 8 p.m. Miami time. (Bloomberg)

No comments:

Post a Comment