Oil falls to 6 month low on concern over Europe

Oil dropped to a six-month low in New York on concern that Greece will have to exit the euro system, compounding Europe's debt troubles and curbing fuel demand. Futures declined 1.2 per cent after German Finance Minister Wolfgang Schaeuble said that market turmoil caused by the Euro- zone crisis may last two more years. Crude capped its third weekly decline as US consumer confidence fell and oil supplies rose to a 22-year high. Prices are down 11 per cent this quarter after climbing 4.2 per cent during the previous three months. "All of the macroeconomic news has been negative," said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. "Oil is moving on what's happening in Europe and what it will mean here. In February, people were afraid to sell oil and now they're afraid to buy it." Crude oil for June delivery fell $1.08 to $91.48 a barrel on the New York Mercantile Exchange, the lowest settlement since October 26. Prices retreated 4.8 per cent last week and are down 7.4 per cent this year. Brent oil for July settlement declined 35 cents, or 0.3 per cent, to end the session at $107.14 a barrel on the London-based ICE Futures Europe exchange. The European benchmark closed at the lowest level since December 20. Brent's premium to the July West Texas Intermediate contract in New York widened to $15.34 from $14.30. The Brent contract may decline to the $99 to $100 lows seen in August and September after breaking through long-term support in the $108.50 to $109.20 area, according to a note by Stephanie Aymes, a technical analyst at Societe Generale in London. Greece's credit rating was downgraded one level late Friday by Fitch Ratings amid concern that the country won't be able to muster the political support needed to sustain its membership in the euro area. Negative impact "It's pretty well known that whatever happens in Europe, it's probably going to have a negative impact on the US economy," said Jacob Correll, a commodity analyst at Summit Energy Inc. in Louisville, Kentucky. "The momentum for the global crude complex in the short term is moving lower." President Barack Obama called the European debt crisis an issue of "extraordinary importance" to the global economy and said that fiscal responsibility should be coupled with policies to promote growth. Obama made the comments after meeting with French President Francois Hollande at the White House, hours before they join other G8 leaders at Camp David. Consumer confidence in the US dropped last week to the lowest level since the end of January, the New York-based Conference Board said Friday. The Federal Reserve Bank of Philadelphia's general economic index shrank in May, a separate report showed. US crude oil supplies rose 2.13 million barrels to 381.6 million in the week ended May 11, the highest since 1990, the Energy Department said May 16. Stockpiles at Cushing, Oklahoma, the delivery point for New York futures, increased 1 million barrels to a record 45.1 million. Electronic trading volume on the Nymex was 513,949 contracts in New York. Volume totalled 636,371 contracts Friday, 6.6 per cent above the three-month average. Open interest was 1.54 million. Seaway pipeline The reversed Seaway pipeline will initially be able to deliver 150,000 barrels a day of oil from Cushing to the Gulf Coast, relieving the supply glut in the centre of the US. Capacity on the 805-kilometre, 30-inch line will increase to more than 400,000 barrels a day in the first quarter of 2013, Enbridge Inc. and Enterprise Products Partners LP said in a statement on Friday. The fall in oil accelerated after US equities dropped as Facebook Inc.'s record initial public offering failed to boost market confidence. The Standard & Poor's 500 Index declined 0.7 per cent and the Dow Jones Industrial Average fell 0.6 per cent. Prices surged to $110.55 on March 1, the highest intraday level since May 4, 2011, on concern that Western sanctions aimed at halting Iran's nuclear programme would disrupt Middle East crude shipments. Iran and the world powers broke a 15-month stalemate during talks on April 14 in Istanbul. Negotiations are set to resume May 23 in Baghdad. From: Gulfnews