Singapore: Crude oil fell in New York for a third day as equity markets declined amid concern the recovery in the global economy will be slow.
Oil traded below $67 (Rs3,276) a barrel as the MSCI Asia Pacific Index fell 2.5%, the most in almost six weeks, after US and European share markets sank on Monday. The dollar gained against the euro for a second day, limiting the appeal of commodities as a hedge against inflation.
“Exuberance in the crude oil market is waning. Telltales appear that a correction in crude oil is imminent,” Stephen Schork, president of the Schork Group in Villanova, Pennsylvania, said on Tuesday in a note to clients. “As far as today goes, we have changed our daily technical bias to bearish.”
Crude oil for August delivery declined as much as $1.13, or 1.7%, to $66.37 a barrel on the New York Mercantile Exchange. It traded at $66.64 at afternoon trading in Singapore. On Monday, the contract dropped 3.6% to settle at $67.50 a barrel. The July contract expired on Monday at $66.93.
US and European stocks fell on Monday after the World Bank projected the world economy will contract 2.9% this year, more than an earlier projection of 1.7%. The Standard and Poor’s 500 Index slid 3.1% in New York, fuelling concerns over the outlook for global oil demand.
“Oil has fallen after a technical breakdown below $67. I think we will go to $66 today,” said Ken Hasegawa, a commodity derivative sales manager at Newedge in Tokyo. “When the market falls on technical selling, the decline can be quite fast.”
Total US daily fuel demand in the four weeks ended 12 June was down 6% from a year earlier, the US energy department said last week.
Petrol inventories rose 3.39 million barrels to 205 million in the week ended 12 June, the biggest increase since January, the department said.
Petrol supplies rose one million barrels last week, according to the median of 10 estimates by analysts surveyed by Bloomberg. The energy department is scheduled to release its weekly report tomorrow at 10.30am in Washington.
Brent crude oil for August settlement dropped as much as $1.08, or 1.6%, to $65.90 a barrel on London’s ICE Futures Europe exchange. It traded at $66.13 at afternoon trading in Singapore.
“Short-term, the trend has to be down,” said Hasegawa. “Given the rally since March, it is time for a healthy correction. Within a month, oil could drop to $60.”
Oil analysts also cited the absence of an immediate impact from continuing civil unrest in Iran, the second largest producer in the Organization of Petroleum Exporting Countries (Opec), as a factor that may further weigh on prices.
Iran’s Revolutionary Guards vowed to put an end to the chaos of street protests against the re-election of President Mahmoud Ahmadinejad. State-run Press TV on Monday cited the country’s Opec governor, Mohammad Ali Khatibi, as telling the Iran Daily newspaper there’s been no impact on crude exports.