By Margot Habiby -
Oil fell, heading for its first weekly drop since June, as the U.S. economy grew less than estimated in the second quarter and a deadlock of U.S. lawmakers over raising the debt limit further threatened expansion.
Futures tumbled as much as 2.6 percent after the Commerce Department reported that gross domestic product climbed at a 1.3 percent annual rate, less than the 1.8 percent median estimate of economists surveyed by Bloomberg News. The Treasury Department has set an Aug. 2 deadline for increasing the U.S.’s $14.3 trillion debt limit to avert a default.
“The markets have been negative all week as we continue to watch the stalled debt ceiling talks,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The GDP number missed expectations and that’s created more pressure on oil and equities.”
Crude for September delivery fell $1.83, or 1.9 percent, to $95.61 a barrel at 12:51 p.m. on the New York Mercantile Exchange. Earlier, it touched $94.95, the lowest price since July 18 on an intraday basis. Prices are down 4.3 percent this week and have risen 19 cents in July.
Brent for September settlement on the London-based ICE Futures Europe exchange dropped 97 cents, or 0.8 percent, to $116.39 a barrel. The European benchmark contract was at a premium of $20.78 a barrel to New York futures, compared with a record close of $22.63 on July 14.
The Standard & Poor’s 500 Index fell 0.4 percent to 1,295.58, and the Dow Jones Industrial Average dropped 68.04 points, or 0.6 percent, to 12,172.07.
Technical Support
Crude in New York is extending losses as prices slide below the 50-day moving average, according to data compiled by Bloomberg. Front-month futures have settled for more than a week above this indicator, at $97.33 today. A breach of technical support usually means prices will continue to fall.
U.S. GDP increased following a 0.4 percent gain in the prior quarter that was less than the 1.9 percent previously estimated, Commerce Department figures showed today in Washington. Household purchases, about 70 percent of the economy, rose 0.1 percent in the second quarter. The U.S. is the world’s largest oil-consuming country.
House Speaker John Boehner, a Republican, delayed a planned vote on debt-limit legislation late yesterday as Senate leaders stood ready to kill the measure should it get to their chamber. Boehner’s plan failed to gain enough backing from his own party members.
Debt Vote
Senate Majority Leader Harry Reid and other Democrats are working to break the impasse over raising the debt limit by devising a strict enforcement mechanism to guarantee future deficit savings, according to party officials. President Barack Obama said today that the two parties are in “rough agreement” on a debt measure and urged senators from both parties to work together to resolve the deadlock.
“The U.S. debt talk resembles a train wreck,” Thorbjoern Bak Jensen, an analyst at Global Risk Management, said by phone from Middelfart, Denmark. “Oil is still awaiting the debt ceiling outcome.”
Oil inventories in Cushing, Oklahoma, the physical delivery point for Nymex futures, rose by 583,000, or 1.6 percent, to 36.9 million barrels on July 26 from July 16, according to data compiled by DigitalGlobe Inc. (DGI) from satellite images.
The Energy Department said July 27 that Cushing stockpiles, including floating and fixed tanks, were 37.1 million. The hub has working storage capacity of 48 million barrels, the department said on May 31.
OPEC Production
Crude production from the 12 members of the Organization of Petroleum Exporting Countries jumped 245,000 barrels a day in July from June to 29.6 million barrels a day, according to a Bloomberg News survey of producers, oil companies and industry analysts. The 11 members with output quotas, all but Iraq, pumped 26.8 million barrels a day in July, up 230,000 barrels a day from June.
Tropical Storm Don, currently in the northwestern Gulf of Mexico and heading for the Texas coastline, has shut in about 6.8 percent of oil and 2.8 percent of gas production from the gulf, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.
Outer rain bands from the storm were approaching the Texas coast, the National Hurricane Center in Miami said in a bulletin at 10 a.m. local time. It’s forecast to make landfall late today or early tomorrow. Don is about 190 miles (305 kilometers) southeast of Corpus Christi, Texas, with maximum winds of 50 miles per hour, the bulletin said.
Crude may drop next week, a Bloomberg News survey showed. Thirteen of 32 respondents, or 41 percent, forecast oil will decrease through Aug. 5. Analysts were split last week, with 41 percent looking for a gain and 41 percent projecting a fall.
Oil volume in electronic trading on the Nymex was 310,035 contracts as of 12:53 p.m. in New York. Volume totaled 426,749 contracts yesterday, 31 percent below the average of the past three months. Open interest was 1.51 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
No comments:
Post a Comment