Crude Oil Falls to One-Month Low as Global Recession Deepens
By Grant Smith and Christian Schmollinger
Jan. 20 (Bloomberg) -- Crude oil fell to the lowest in a month in New York on concern the global recession will deepen, further eroding demand for energy.
China’s official urban unemployment rate jumped for the first time since 2003 to 4.2 percent, government data showed today, while initial jobless claims in the U.S. are forecast to increase for a second week. Crude also fell as the U.S. dollar strengthened to its highest in five weeks against the euro, limiting the appeal of commodities as a currency hedge.
“Weak demand is still dominating,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “As long as the market ignores the supply side, we’ll have weak sentiment.”
Crude oil for February delivery traded at $32.84 a barrel, down 10 percent from last week’s close, in electronic trading on the New York Mercantile Exchange at 9:18 a.m. London time. The price fell as low as $32.70 a barrel earlier today, the lowest since Dec. 19.
The contract expires today. Floor trading was closed for the Martin Luther King Jr. holiday yesterday. Trades then will be booked today for settlement.
“For the next six months we’ll see awful economic data coming out, banks possibly having to be nationalized and excess inventories in the U.S.,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “There is really nothing that can pull this market higher.”
The more-actively traded March contract was at $39.31, down 7.7 percent, after falling as low as $39.11 today.
Brent crude oil for March settlement fell as much as $1.54, 3.5 percent, to $42.96 a barrel on London’s ICE Futures Europe exchange. The contract fell $2.07, or 4.4 percent, to $44.50 a barrel yesterday.
Rising Stockpiles
Russia and Ukraine signed 10-year natural-gas contracts, ending a dispute that’s squeezed supplies to the European Union for almost two weeks. Shipments resumed today.
Rising U.S. stockpiles and forecasts from the International Energy Agency and OPEC on declining world demand contributed to an 11 percent decline in Nymex crude last week. Prices are down 20 percent this year, after tumbling 54 percent in 2008.
Crude-oil inventories at Cushing, Oklahoma, where West Texas Intermediate traded on the Nymex is stored, climbed 2.5 percent to 33 million barrels last week, the Energy Department said this week. It was the highest since at least April 2004, when the department began keeping records for the location.
First-time claims for U.S. unemployment benefits rose to 543,000 in the week ended Jan. 17, according to a Bloomberg survey before a Labor Department report.
China Jobless
Registered unemployment in China increased to 4.2 percent as of Dec. 31, Yin Chengji, spokesman for the Ministry of Human Resources and Social Security, said in a transcript of a press briefing in Beijing today. It was 4 percent three months earlier.
Oil may make a “swift and violent rebound” to $65 a barrel in the second half as OPEC production cuts take effect and other producers also trim output, Goldman Sachs analyst Jeffrey Currie said at a conference in London yesterday.
To contact the reporters on this story: Grant Smith in London at [email protected]; Christian Schmollinger in Singapore at [email protected].
