Oil Falls a Third Day on Concern Debt Crisis Will Curb Demand

June 8 (Bloomberg) -- Crude oil declined for a third day in New York on concerns the government debt crisis in Europe will widen and curtail the recovery in global fuel demand.

Oil slipped after the euro tumbled to a four-year low against the dollar yesterday, curbing the appeal of commodities as an alternative investment. U.S. equities dropped, sending the Standard & Poor’s 500 Index to the biggest two-day loss since March 2009. U.S. gasoline stockpiles were probably unchanged last week, according to a Bloomberg News survey before a government report tomorrow.

“It’s certainly a case of macro sentiment being quite negative,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. “It’s been a volatile few weeks across oil, equity markets and financial markets in general. Short-term, we should expect that volatility to continue.”

Crude oil for July delivery dropped 45 cents, or 0.6 percent, to $70.99 a barrel in electronic trading on the New York Mercantile Exchange at 9:46 a.m. Sydney time. Yesterday, the contract fell 7 cents to $71.44.

The dollar traded little changed at $1.1928 per euro at 9:46 a.m. Sydney time, after rising 0.4 percent yesterday.

“Europe is going down, so that means their currency and global markets are as well,” said Mike Sander, an investment adviser a Sander Capital Advisors in Seattle. “There is no fundamental reason for a rally at this time.”

Crude Supplies

U.S. oil supplies probably declined 1 million barrels from 363.2 million last week, according to the median of 10 estimates by analysts in the survey before tomorrow’s Energy Department report tomorrow.

Current prices are high enough to encourage investment in new supplies, Iraqi Oil Minister Hussain al-Shahristani said yesterday in Kuala Lumpur. The Organization of Petroleum Exporting Countries isn’t planning to hold an emergency meeting before its next scheduled gathering on Oct. 14, he said.

Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended June 1, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 24,875 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 15,568 contracts, or 38 percent, from a week earlier.

Brent crude for July delivery gained 3 cents to $72.12 a barrel on the ICE Futures Europe exchange in London yesterday.