Crude Oil Extends Decline After U.S. Equities Drop on BP Spill

June 2 (Bloomberg) -- Crude oil dropped for a third day in New York as energy companies led a decline in U.S. equities after BP Plc failed to halt the flow of oil from its damaged well in the Gulf of Mexico.

Oil dropped below $72 a barrel after companies such as Anadarko Petroleum Corp. and Halliburton Co. made energy the worst-performing sector in the Standard & Poor’s 500 Index. Manufacturing growth from China to the euro region weakened in May, increasing speculation that the global economic rebound may be slowing.

“There’s always a concern that a weak stock market will lead to a weak economy,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “When you have enough big companies like BP getting hit, that can affect the Dow and the S&P.”

Crude oil for July delivery dropped as much as 82 cents, or 1.1 percent, to $71.76 a barrel, in electronic trading on the New York Mercantile Exchange. It was at $72.12 at 8:48 a.m. Sydney time. Yesterday, the contract lost $1.39, or 1.9 percent, to $72.58. Futures fell 14 percent in May.

The Standard & Poor’s 500 Index fell 1.7 percent to 1,070.71 in New York. The Dow Jones Industrial Average slumped 112.61 points to 10,024.02 after last week completing a 7.9 percent monthly tumble, its worst May since 1940.

BP Plunges

“I can think of no reason for the price oil to rally at this point,” said Mike Sander, an investment adviser a Sander Capital Advisors in Seattle. “The outlook for equities and commodities for now looks bleak.”

BP’s shares plunged the most in 18 years in London trading, losing 13 percent to 430 pence. Anadarko, which owns a 25 percent stake in the well, dropped 20 percent to $42.10, its biggest decline on record.

Oil dropped as much as 3.2 percent yesterday after the Federation of Logistics and Purchasing said China’s Purchasing Managers’ Index declined to 53.9 in May from 55.7 in the previous month amid a drop in property sales and building. It fell short of a median 54.5 estimate from 18 economists surveyed by Bloomberg News.

U.S. crude supplies probably fell last week for the first time since April, a Bloomberg News survey showed. Stockpiles dropped 500,000 barrels from 365.1 million barrels in the prior week, based on the median estimate of 11 analysts surveyed by Bloomberg. The Energy Department is scheduled to release its weekly report tomorrow, a day later than usual because of the Memorial Day holiday.

Brent crude oil for July settlement lost $1.94, or 2.6 percent, to $72.71 on the London-based ICE Future Europe exchange yesterday.