Oil Extends Decline on Euro Debt Crisis, U.S. Recovery Concern

May 21 (Bloomberg) -- Crude oil extended its decline in New York on concerns Europe will struggle to contain the sovereign- debt crisis and doubts about the strength of the economic recovery in the U.S., the world’s largest energy consumer.

Oil fell for the seventh time in eight days yesterday as French Finance Minister Christine Lagarde said countries that share the euro need greater coordination. The index of U.S. leading economic indicators unexpectedly fell in April, and the most Americans in a month filed applications for unemployment benefits. Crude inventories rose for the 15th time in 16 weeks in the seven days ended May 14.

“The contagion effect across Europe is very real,” said Peter McGuire, managing director at CWA Global Markets Pty in Sydney. “There is just so much uncertainty in the market. Oil was probably overpriced in the high 80s and I think it’s probably got a little more to the downside.”

Crude oil for July delivery dropped 78 cents, or 1.1 percent, to $70.02 a barrel, in electronic trading on the New York Mercantile Exchange at 10:15 a.m. Sydney time. The July contract has fallen 7.7 percent this week.

Yesterday, the June contract dropped $1.86, or 2.7 percent, to $68.01, the lowest settlement since Sept. 29. June futures expired at the close of floor trading.

The 0.1 percent decrease in the index of U.S. leading economic indicators signaled that the economic expansion may slow in the second half of 2010. It was the first drop in a year for the New York-based Conference Board’s measure of the outlook for three to six months. It followed a revised 1.3 percent gain in March.

OPEC Shipments

The Organization of Petroleum Exporting Countries will ship 23.53 million barrels a day in the four weeks to June 5, compared with 23.25 million a day in the month to May 8, the Halifax, England-based tanker-tracker Oil Movements said yesterday. That’s the first reported increase in five weeks. The data exclude Ecuador and Angola.

U.S. crude oil stockpiles rose 162,000 barrels to 362.7 million in the week ended May 14, said the Energy Information Administration, the statistical unit of the Energy Department. Supplies were forecast to increase 500,000 barrels, according to the median estimate from 15 analysts surveyed by Bloomberg News.

Initial jobless claims in the U.S. rose by 25,000 to 471,000 in the week ended May 15, the highest level since April 9, Labor Department figures showed yesterday in Washington. Applications were projected to drop to 444,000, according to the median estimate of 44 economists in a Bloomberg News survey.

Brent crude oil for July settlement dropped 73 cents, or 1 percent, to $71.11 a barrel on the London-based ICE Futures Europe exchange at 10:18 a.m. Sydney time. Yesterday the contract declined $1.85, or 2.5 percent, to end the session at $71.84.