Tuesday, August 17, 2010

Crude Oil Trades Near Five-Week Low on Signs Economic Growth Is Faltering

Crude oil traded near a five-week low after Asian equities declined, New York manufacturers’ orders fell and U.S. homebuilders turned more pessimistic, increasing concern that global economic growth is faltering.

Oil dropped for a fifth day yesterday, the worst run of losses in more than a month, after economic growth in Japan missed expectations. The Federal Reserve Bank of New York reported that orders and sales dropped in August for the first time in more than a year.

“The market is still concerned about weakness in the global economy,” said Ken Hasegawa, commodity-derivatives sales manager at brokerage Newedge in Tokyo.

Crude for September delivery was at $75.33 a barrel, up 9 cents, at 9:25 a.m. in Singapore on the New York Mercantile Exchange. Yesterday, the contract fell 15 cents to settle at $75.24 a barrel, the lowest level since July 12. Futures have dropped 5.1 percent this year.

The Federal Reserve Bank of New York’s so-called Empire State factory index showed that bookings dropped for the first time since June 2009, while sales fell at the fastest pace since March 2009. The National Association of Home Builders/Wells Fargo confidence index unexpectedly declined to a 17-month low.

The Nikkei 225 weakened as much as 1.2 percent to 9,084.24 in Tokyo, dropping for a second day. The broader Topix index retreated as much as 1 percent.

Homebuilder Confidence

U.S. equities were mixed. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,079.38 as of 4 p.m. in New York, and the Dow Jones Industrial Average dropped 1.14 points to 10,302.01.

The National Association of Home Builders/Wells Fargo confidence index dropped to 13 this month, the lowest level since March 2009, from 14 in July, the Washington-based group said yesterday. Economists forecast a reading of 15, according to the median estimate in a Bloomberg survey. Readings of less than 50 mean that more respondents said conditions were poor.

Federal Reserve policy makers last week announced their first attempt to bolster growth since March 2009.

“If there is more weak data from U.S. economic indices in the rest of the week, the market may go down to around $72 a barrel,” said Newedge’s Hasegawa.

Gross domestic product in Japan climbed an annualized 0.4 percent in the second quarter, the country’s Cabinet Office said yesterday, pushing the economy into third place behind the U.S. and China. The median estimate of 19 economists surveyed by Bloomberg News was for growth of 2.3 percent.

Brent crude oil for October was at $75.66 a barrel, 1.1 percent higher on the London-based ICE Futures Europe Exchange. It rose 0.2 percent to settle at $75.63 yesterday. The September contract, which expired at the close yesterday, fell 26 cents, or 0.4 percent, to settle at $74.85 a barrel.