Oil Falls From Two-Month High as Stocks Slump on Credit Concern

March 17 (Bloomberg) -- Crude oil fell in New York, retreating from yesterday’s two-month closing high, as U.S. stocks dropped for the first time in five days as concern over rising credit-card defaults ended a rally in financial companies.

The Dow Jones Industrial Average and Standard & Poor’s 500 Index slipped after American Express Co. reported higher delinquency rates. Oil and equities had rallied earlier after the Group of 20 vowed to clean up toxic assets, Federal Reserve Chairman Ben S. Bernanke said the recession may end this year and U.K. bank Barclays Plc reported a “strong” start to 2009.

“The market fell back below $47 most likely due to the collapse of the Dow to down 7 from up 150 taking place in the last hour of trading,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. ‘If the Dow’s rally starts to fade, so could the price of oil and fall back to $40. OPEC seems to have put a bottom in the market in the mid $30 range.”

Crude oil for April delivery fell 40 cents, or 0.8 percent, to $46.95 a barrel at 10:24 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, April futures rose $1.10 to $47.35 a barrel, the highest settlement since Jan. 6. Prices have increased 6.2 percent so far this year.

The Standard & Poor’s 500 Index slipped 0.4 percent to 753.89, erasing a gain of as much as 2.4 percent. The Dow Jones Industrial Average lost 7.01 points, or 0.1 percent, to 7,216.97. The S&P 500 had jumped 12 percent in the previous four sessions on speculation the worst of the credit crisis was over.

OPEC Decision

Finance chiefs from the Group of 20 nations vowed to work together to help global banks recover from more than $1.2 trillion in credit losses. Bernanke said in an interview broadcast on CBS Corp.’s “60 Minutes” on March 15 that if the government succeeds in stabilizing the financial system, the recession will probably end this year.

Crude futures plunged in early trading yesterday after the Organization of Petroleum Exporting Countries deferred another production cut for at least 11 weeks at its weekend meeting.

OPEC has reduced daily output targets by 4.2 million barrels since September to prevent a glut and slow the decline in prices. The group is scheduled to meet again on May 28.

“OPEC has a delicate balancing act,” said Gene Pisasale, who helps manage $13 billion at PNC Capital Advisors in Baltimore. “They want to avoid the impression that they are aggressively working to raise prices at a time when the world is facing a severe contraction. At the same time their cash flow argues for just that.”

Adhering to Quotas

Saudi Arabia, the world’s biggest oil exporter, is the only member to cut more output than agreed last year, according to a monthly OPEC report released on March 13. Iran and Nigeria have made good on only about half of their promised reductions, the report showed.

“We need to adhere and then in May we can look if other measures can be taken,” OPEC President Jose Maria Botelho de Vasconcelos said.

Saudi Arabia is willing to keep oil output below its OPEC quota level of about 8 million barrels a day unless consumers want more, Saudi Arabian Oil Minister Ali al-Naimi said yesterday.

Crude oil in New York has tumbled from a record $147.27 in July because of the economic contraction in major consuming countries. Futures have rebounded since touching $32.40 on Dec. 19, the lowest since February 2004.

‘Unfair Levels’

“The last thing OPEC wants to do is give bullish speculators a reason to start buying this market to bid prices up to unfair levels,” Stephen Schork, president of Schork Group Inc. of Villanova, Pennsylvania, said in an interview with Bloomberg Television. That could “ultimately retard the recovery globally and therefore keep demand depressed for longer than it needs.”

The Paris-based International Energy Agency last week cut its 2009 forecast for oil demand for a seventh month. Both the IEA and OPEC see demand slumping more than 1 million barrels a day this year, to about 84.5 million.

Brent crude oil for April settlement declined 95 cents, or 2.1 percent, to end yesterday’s session at $43.98 a barrel on London’s ICE Futures Europe exchange. The April contract expired yesterday. The more-active May contract rose 58 cents, or 1.3 percent, to settle at $46.46 a barrel.