Oil Falls for Second Day on Doubts Over Pace of Demand Recovery
Sept. 14 (Bloomberg) -- Crude oil fell for a second day on speculation its rally to $75 a barrel last month outpaced the rate of recovery in the global economy.
A report tomorrow in the U.S., the world’s largest oil consumer, may show retail spending, excluding gasoline and autos, was barely changed in August, according to a survey of economists. Oil dropped the most in two weeks on Sept. 11 after failing for a fourth day to breach $73 and as U.S. equities declined for the first time in six days.
“We’re still waiting to see if the fundamentals can catch up with the sentiment in the oil market,” said Toby Hassall, analyst with Commodity Warrants Australia Pty in Sydney. “There definitely seems to be a bit of significant resistance being encountered once we get into the $70s.”
Crude oil for October delivery dropped as much as 75 cents, or 1.1 percent, to $68.54 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $68.55 at 7:53 a.m. in Singapore.
The contract fell 3.7 percent to $69.29 on Sept. 11, the biggest decline since Aug. 31. Prices slumped even as the dollar fell for a sixth day to its lowest in almost a year, making commodities priced in the currency more attractive.
Oil futures have gained 54 percent this year as rising equity prices emboldened investors and the weaker dollar lured funds toward oils and metals.
Pre-Emptive Rally
Prices are pre-empting the recovery in global demand and have been driven by investors buying oil to profit from the weaker dollar and improving sentiment, Hassall said.
The weaker dollar will be “very supportive for the commodity space” and will likely offset any signs of a slower- than-expected improvement in demand or a mild winter in the northern hemisphere, he said.
“I don’t see a huge move to the downside for oil,” he said. “If we do have a mild winter and we don’t see much of a draw down in distillate stocks, I think that may limit the upside.”
World oil demand usually peaks in the fourth and first quarters as refiners make heating fuel for the northern hemisphere winter. Daily consumption may climb to 84.7 million barrels in the three months ended Dec. 31 from 84.4 million now, the International Energy Agency forecast Sept. 10.
U.S. oil inventories are 12 percent higher than a year ago, the Energy Department said in a weekly report on Sept. 10. Distillate stockpiles, including heating oil and diesel, hold 25 percent more than last year and are at their highest since 1983.
Brent crude oil for October settlement fell 56 cents, or 0.8 percent, to $67.13 a barrel on the London-based ICE Futures Europe exchange. It dropped 3.1 percent to $67.69 on Sept. 11.
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