Wednesday, June 30, 2010

Oil Falls a Third Day on Concerns Over China, U.S. Economies

June 30 (Bloomberg) -- Oil dropped for a third day on concern over weakening economic growth in China and as confidence declined more than forecast among consumers in the U.S., the world’s biggest energy user.

Oil lost 3 percent yesterday after the Conference Board said its leading economic index for China rose more slowly in April than previously estimated. The board’s U.S. confidence index in June was lower than all forecasts in a Bloomberg News survey. The Standard & Poor’s 500 Index dropped to its lowest level since October.

“Crude has been shellacked due to confidence around the world eroding,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “The revision in confidence was a concern.”

Crude oil for August delivery dropped 43 cents, or 0.6 percent, to $75.51 a barrel on the New York Mercantile Exchange at 9:24 a.m. Sydney time. Yesterday, the contract fell $2.31 to $75.94, the biggest one-day drop since June 4.

Oil is heading for its first quarterly decline since 2008, losing 9.9 percent since the end of March. Futures have fallen 4.9 percent this year.

The measure of China’s economy compiled by the New York- based Conference Board rose 0.3 percent in April, less than the 1.7 percent gain it reported June 15. The research group corrected the outlook, saying in an e-mailed statement that the previous reading contained a “calculation error” for total floor space on which construction began.

Consumer Confidence

The board reported its U.S. confidence index slumped to 52.9 in June from a revised 62.7 in May, as Americans became pessimistic about the outlook for the labor market and the economy. The median forecast of 71 economists’ estimates in the Bloomberg survey called for a decline to 62.5.

President Barack Obama said after meeting with Federal Reserve Chairman Ben S. Bernanke yesterday that the U.S. economy is strengthening and recovering from the worst recession since the 1930s. Still, job losses remain a “great concern” and the economy faces “headwinds” because of nervousness in the U.S. about Europe’s debt crisis.

Oil also fell on predictions that Tropical Storm Alex, moving northwest across the southern Gulf of Mexico, will miss oil-producing areas. It’s forecast to make landfall in Mexico, just south of the U.S. border, late today as a hurricane, according to the U.S. National Hurricane Center in Miami.

Crude Supplies

U.S. crude inventories declined 3.4 million barrels last week, according to a report from the industry-funded American Petroleum Institute. An Energy Department report today may also show supplies fell.

Stockpiles probably dropped 1 million barrels in the week ended June 25 from 365.1 million the prior week, according to the median estimate of 15 analysts surveyed by Bloomberg News before tomorrow’s government report. It would be the first decline in three weeks.

Oil-supply totals from the Petroleum Institute and Energy Department moved in the same direction 75 percent of the time over the past four years, according to data compiled by Bloomberg.

Brent crude for August delivery fell $2.15, or 2.8 percent, to $75.44 a barrel on the ICE Futures Europe exchange in London yesterday.