Oil Trades Near Three-Month Low on Europe Risk to Global Growth

May 17 (Bloomberg) -- Crude oil traded near a three-month as the sovereign debt crisis in Europe rattled investor confidence and risked slowing the global economy’s recovery from its worst recession since World War II.

Oil’s 16 percent plunge this month is being driven by Europe’s debt crisis and is beyond OPEC’s influence, Qatar’s Energy Minister Abdullah al-Attiyah said May 15. The euro fell to an 18-month low earlier today on speculation austerity measures planned by indebted nations including Spain and Greece will cut growth in the region.

“There are concerns that the European debt crisis will have a negative impact on the global growth outlook and in-turn global fuel demand,” said Toby Hassall, commodity researcher at CWA Global Markets Pty in Sydney. “We’re seeing an increase in risk aversion, which has in-turn has put upward pressure on the U.S. dollar which is also going to have an impact as well.”

Crude oil for June delivery was at $71.59 a barrel, down 2 cents, in after-hours electronic trading on the New York Mercantile Exchange at 7:54 a.m. in Singapore. It earlier rose as much as 0.7 percent to $72.13.

The contract tumbled as much as 4.8 percent on May 14 as global equities sank and the euro fell for a fourth week. Oil closed at $71.61 a barrel, the lowest settlement since Feb. 5.

While there is a risk that Europe’s woes will weigh on the global recovery, there is no evidence of any “substantial impact” yet, CWA’s Hassall said. The global economy will recover and there will be investors buying oil at current levels to profit from the longer-term demand recovery, he said.

Price Outlook, Growth

“I don’t believe it’s going to continue to fall,” he said.

A report tomorrow in the U.S., the world’s largest oil user, will probably show new home construction last month reached the highest annual pace since November 2008, according to a survey of economists.

Oil will likely continue to trade between $70 and $90 a barrel, the head of Credit Suisse’s European oil and gas group said yesterday.

“My expectation is that most people won’t change long-term price forecasts,” James Janoskey said in Doha, Qatar. “I haven’t sensed anybody panicking that oil is going to get back down to $30 or $40.”

New York prices, particularly the near-month contract, have also been depressed by rising U.S. stockpiles, Hassall said.

“This is typically around the time we see inventories peak in the U.S. It will be interesting to see if the builds continue, and over time, just how quickly they get drawn down,” he said.

Inventories, Brent Premium

U.S. crude oil supplies rose 1.95 million barrels to 362.5 million in the week ended May 7, the 14th increase in 15 weeks, as refiners cut processing rates, the Energy Department reported last week. Inventories were 6.1 percent above the five-year average for the period.

Brent crude oil for July delivery rose 4 cents to $77.97 a barrel on the London-based ICE Futures Europe exchange. It fell 4.3 percent to $77.93 a barrel on May 14. The Nymex July contract fell 13 cents to $75.30 a barrel.

Hedge fund managers and other large speculators reduced their bets on rising oil prices to a two-month low last week, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 15 percent to 92,895 contracts on the New York Mercantile Exchange in the week ended May 11, the commission said last week.