Crude Oil Drops Below $76 as Weaker U.S. Growth May Cut Demand

Nov. 25 (Bloomberg) -- Oil dropped below $76 a barrel in New York on speculation weaker growth in the U.S., the world’s largest energy consumer, may limit demand.

Oil declined to a five-week low yesterday after the Commerce Department said the U.S. economy expanded at a 2.8 percent annual rate in the third quarter, down from a prior estimate of 3.5 percent. The Energy Department will probably report today that crude-oil supplies climbed by 1.5 million barrels last week, according to a Bloomberg News survey.

“As long as there are tepid headlines about the economy, oil is going to be under pressure,” said Michael Fitzpatrick, vice president of energy with MF Global in New York. “We seem to be attracted to the lower end of the recent range and will probably test it before long.”

Crude oil for January delivery traded at $75.84 a barrel, down 18 cents, in electronic trading on the New York Mercantile Exchange at 10:27 a.m. in Sydney. Yesterday, the contract fell $1.54, or 2 percent, to $76.02, the lowest settlement since Oct. 14. Prices have gained 70 percent this year.

Oil market transactions may be lighter than normal through the end of the week because of the U.S. Thanksgiving holiday. There will be no floor trading on Nov. 26 and the market will close early on Nov. 27.

The Energy Department’s report on supplies in the week ended Nov. 20 is due at 10:30 a.m. in Washington. The American Petroleum Institute reported yesterday that U.S. crude-oil stockpiles increased 3.35 million barrels to 336.4 million last week.

Stockpiles ‘Too High’

Oil stockpiles worldwide are too high and nations must be careful about the amount of supply in the market, Nigerian Petroleum Minister Rilwanu Lukman said yesterday. The African country was OPEC’s eighth-biggest producer in October, according to a Bloomberg News survey.

The Organization of Petroleum Exporting Countries meets on Dec. 22 in Luanda, Angola, to discuss production targets. The group agreed at its Sept. 9 meeting in Vienna to maintain production quotas at 24.845 million barrels a day.

The Standard & Poor’s 500 Index declined 0.1 percent in New York yesterday and the Dow Jones Industrial Average slipped 0.2 percent to 10,433.71. The dollar traded at $1.4961 per euro at 10:16 a.m. in Sydney, from $1.4968 yesterday.

Brent crude oil for January delivery on the London-based ICE Futures Europe exchange declined $1, or 1.3 percent, to end the session at $76.46 a barrel yesterday.

Gold Gains as Dollar Drop Spurs Investor Demand for Hard Assets

Nov. 24 (Bloomberg) -- Gold rose for an eighth consecutive session in New York on speculation that the dollar may fall further and central banks and investors will buy more bullion as an alternative investment.

Futures reached a record $1,174 an ounce yesterday as the U.S. Dollar Index fell the most in two weeks and Russia’s Bank Rossii said it bought more gold in October. The index is down 7.6 percent this year after the Federal Reserve cut its key lending rate to a record low in December and kept it there. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to the highest level since June.

“When the Fed repeatedly says that the rates will remain low, that means the dollar will weaken and gold will rise,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, and a gold trader for more than three decades. Still, “it’s very possible that it will decline, short term.”

Gold futures for December delivery gained $1.10, or 0.1 percent, to $1,165.80 an ounce on the New York Mercantile Exchange’s Comex division, after earlier rising as much as 0.6 percent. The most-active contract is up 32 percent this year, heading for the best annual performance since 1979. Gold for February delivery gained $1.20 to $1,167.40 an ounce.

After the close of floor trading, the metal added to its gains as comments from the Federal Reserve weakened the dollar and fueled concern that inflation may accelerate.

Fed officials said record-low interest rates might fuel “excessive” speculation in financial markets or an “unanchoring” of stable inflation expectations, according to minutes of their Nov. 3-4 meeting released today.

Rising Demand

In London, gold for immediate delivery gained $3, or 0.3 percent, to $1,169.10 an ounce at 8:31 p.m. local time.

Gold “is likely to find further investment demand in the coming session following the 3.9-ton increase in the SPDR ETF,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. “Gold has found good support around the $1,160 level.”

The dollar index, a six-currency gauge of the greenback’s value, was little changed. The measure touched a 15-month low on Nov. 16.

“The dollar is weak and that is supporting” gold, Miguel Perez-Santalla, a vice president of sales at Heraeus Precious Metals Management in New York, said in a report. “Gold attempted to reach the $1,200 level yesterday and failing, it dropped off, but the market sees these drops as opportunities to buy.”

Central-Bank Buyers

The International Monetary Fund, which set out to sell one- eighth of its gold reserves earlier this year, is trying to complete the process as soon as possible, said Andrew Tweedie, the head of the IMF’s finance department. Earlier this month, India said it bought 200 metric tons from the IMF. Mauritius purchased 2 tons from the lender. Along with Russia’s central bank, Sri Lanka also has been buying gold.

“The investment case for gold has become increasingly compelling,” Dan Smith, an analyst at Standard Chartered Plc, said in a report. The metal will average $1,150 an ounce next year, including $1,300 in the fourth quarter, he said.

“There is definitely accumulation going on, whether by central banks or high-net-worth individuals, so we can see the gold price is going to carry on moving higher, but that doesn’t mean that we’re not going to see consolidation or pullbacks,” David Baker, a managing partner at Baker Steel Capital Managers, said in a Bloomberg Television interview.

Gold Holdings

The rally has pushed London gold’s 14-day relative strength index above the level of 70, which is viewed by some investors and analysts who follow technical charts as a sign that the price may soon fall. Today’s reading was about 80.

Holdings in the SPDR Gold Trust expanded yesterday to 1,121.46 tons, the most since June 29. The fund’s holdings reached a record 1,134.03 tons on June 1.

Also in New York, silver futures for March delivery fell 15.5 cents, or 0.8 percent, to $18.494 an ounce. Platinum for January delivery dropped $23.80, or 1.6 percent, to $1,443.80 an ounce and March palladium slid 1 percent to $370.80 an ounce.