Oil drops most in week as Bernanke, Obama don’t boost confidence
Oil fell the most in a week in New York as speeches yesterday by President Barack Obama and Federal Reserve Chairman Ben S. Bernanke didn’t boost confidence in the world’s largest economy.
Crude tumbled as much as 3.1 percent after Bernanke stopped short of outlining new plans to boost growth. Obama, speaking before a joint session of Congress, demanded that lawmakers act on a plan to boost spending, stem layoffs and cut taxes.
“Bernanke didn’t give any further insight into stimulus measures, and Obama’s speech has been received very tepidly, which continues to weigh on concerns about the U.S. economy,” said Matt Smith, a commodities analyst for Summit Energy Services Inc. in Louisville, Kentucky. “This is dominating the move in the crude market.”
Crude for October delivery dropped $2.23, or 2.5 percent, to $86.82 a barrel at 11:17 a.m. on the New York Mercantile Exchange. Prices are up 0.4 percent this week and have fallen 5 percent this year.
Brent for October settlement declined $2.45, or 2.1 percent, to $112.10 a barrel on London’s ICE Futures Europe exchange.
Bernanke told economists yesterday that the Fed has measures at hand and is “prepared to employ these tools as appropriate” when policy makers meet this month. Obama challenged Congress to pass a $447 billion jobs plan “right away” that would boost spending on infrastructure, stem teacher layoffs and cut in half the payroll taxes paid by workers and small business owners.
Euro Falls
Oil also fell as a declining euro undermined the appeal of dollar-denominated commodities, outweighing concerns that a tropical storm off Mexico’s Yucatan Peninsula will limit the supply of crude.
“The macroeconomic data looks more bleak and so the demand side is acting as a capping mechanism,” said Andy Sommer, a senior trader at EGL AG in Dietikon, Switzerland, who predicts Brent will end the year at about $115 a barrel.
The euro fell 1.4 percent to $1.369 in New York, the lowest level since February.
The Standard & Poor’s 500 Index fell 1.5 percent to 1,168.14, erasing its weekly gain. The Dow Jones Industrial Average dropped 190.72, or 1.7 percent, to 11,105.09.
“There are two critical factors dominating the outlook for the oil markets at this time, what global economic developments are doing to demand and the prospects for a pickup in Libyan oil exports,” according to a report published today by Deutsche Bank analysts including Adam Sieminski, the company’s Washington-based chief energy economist.
U.S. Demand
U.S. total products supplied as averaged over four weeks fell 1.2 percent to 19.4 million barrels a day in the period to Sept. 2, according to an Energy Department report yesterday. It was the second week showed the measure of demand in the world’s largest energy-consuming country had fallen after four weeks of increases.
Libya may export a crude-oil cargo this month for the first time since March from the country’s west as the holder of Africa’s biggest oil reserves rebuilds production after deposing ruler Moammar Gadhafi.
An 80,000-metric-ton cargo of crude is being offered for shipment from the port of Mellitah this month, three people with direct knowledge of the transaction said yesterday. The oil, equal to 600,000 barrels, will be loaded from Sept. 15 to 17, the people said, declining to be identified because the consignment has yet to be publicly announced.
Tropical Storm Nate
Tropical Storm Nate, 125 miles (200 kilometers) west of Campeche, Mexico, is forecast to move toward the Mexican coast, according to a National Hurricane Center advisory issued before 11 a.m. in New York.
Top winds were 65 miles an hour, under the 74 mph threshold for a hurricane. Nate was moving northwest at 3 mph, away from most U.S. oil and gas platforms in the Gulf of Mexico, home to 27 percent of U.S. oil output and 6.5 percent of natural-gas production.
BP PLC and Apache Corp. said they were beginning evacuations of some workers. The BP decision affects non- essential workers at the Atlantis, Holstein and Mad Dog platforms in the Gulf, according to a telephone hot line message. Apache was removing nonessential workers from facilities in the far western Gulf, Bill Mintz, a company spokesman, said in an email yesterday.
Petroleos Mexicanos, the state-owned oil company, said three Gulf crude export terminals were closed yesterday, Coatzacoalcos, Dos Bocas and Cayo Arcas, according to a weather bulletin on the website of Mexico’s Merchant Marine.
Fourteen of 28 analysts, or 50 percent, of analysts in a Bloomberg News survey forecast oil prices will decline next week amid heightened concern that global economic growth is slowing. Seven respondents, or 25 percent, predicted prices will increase and seven estimated there will be little change during the period. Last week 50 percent of surveyed analysts projected a drop.