Wednesday, May 12, 2010

Crude Oil Falls for a Second Day on European Bailout Skepticism

May 12 (Bloomberg) -- Crude oil fell for a second day on concern that Europe’s $1 trillion bailout is insufficient to end the region’s sovereign debt crisis, eroding fuel consumption.

Oil dropped 0.6 percent yesterday after the euro weakened against the dollar on concern that Greece, Spain and Portugal will struggle to contain their deficits. U.S. crude stockpiles rose 362,000 barrels last week, according to the American Petroleum Institute. A government report today will also show inventories increased, according to a Bloomberg News survey.

“There’s some skepticism about the ultimate effectiveness of the European Union bailout package,” Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney, said by telephone today. “Sovereign debt concerns raise concern about the prospects of a recovery in Europe and globally, and therefore fuel demand.”

Crude oil for June delivery dropped as much as 73 cents, or 1 percent, to $75.64 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $75.70 at 9:46 a.m. Singapore time. Yesterday, the contract fell 43 cents, or 0.6 percent, to close at $76.37.

Leaders of the 16 European nations using the single currency agreed to lend as much as 750 billion euros ($946 billion) to the most-indebted member countries. The European Union was responsible for about 17 percent of global oil demand in 2008, according to BP Plc, which publishes its Annual Statistical Review of World Energy each June. Oil rose 2.3 percent May 5 on the announcement.

The dollar traded at $1.2646 per euro at 11:22 a.m., up 0.1 percent from $1.2662 yesterday.

Crude Supplies

U.S. crude oil stockpiles probably increased 1.6 million barrels in the week ended May 7 from 360.6 million a week earlier, according to the median of 17 analyst estimates before an Energy Department report today.

“It’s still a case of oversupply in the U.S. market,” CWA’s Hassall said.

The Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

China expanded its daily crude processing volume by 17 percent to a record 8.4 million barrels a day in April, according to data released yesterday by China Mainland Marketing Research Co., which compiles information for the government. The Organization of Petroleum Exporting Countries yesterday increased its 2010 demand outlook on gains in Chinese consumption.

OPEC expanded its forecast for worldwide consumption this year by 180,000 barrels, or 0.2 percent, to 85.38 million barrels a day. The group boosted its Chinese demand estimate by 50,000 barrels a day to 450,000.

Brent crude oil for June settlement dropped as much as 52 cents, or 0.7 percent, to $79.97 a barrel on the London-based ICE Futures Europe exchange, and was at $80.07 at 9:47 a.m. Singapore time. Yesterday, the contract increased 37 cents, or 0.5 percent, to end the session at $80.49.


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