Oil Is Steady After $3 Decline on Slower Europe Economic Growth

By Christian Schmollinger

July 8 (Bloomberg) -- Crude oil was little changed in New York after falling more than $3 a barrel yesterday on signs economic growth is slowing across Europe, which may curtail energy demand.

Oil dropped for the first session in four yesterday as German production fell 2.4 percent from April, the biggest decline since February 1999, and the index of U.K. manufacturing production unexpectedly fell to the lowest since September.

``It's looking like it's not just the U.S., but Europe is also looking like it's slowing down so it doesn't point to a strong demand picture,'' said Toby Hassall, a research analyst at Commodity Warrants Australia in Sydney.

Crude oil for August delivery was at $141.47 a barrel, up 10 cents, at 9:26 a.m. Singapore time on the New York Mercantile Exchange. Yesterday, oil fell as much as 4 percent as the dollar rose amid speculation that leaders from the Group of Eight industrialized nations may signal support for the currency and address high energy prices.

Oil yesterday settled down $3.92, or 2.7 percent, at $141.37 a barrel. It reached a record $145.85 on July 3. Prices have surged 96 percent in the past year.

Crude oil's decline was part of larger drop in all commodities, which fell the most since March, led by grain futures. The Reuters/Jefferies CRB Index dropped 2.8 percent to 460.23, the biggest since March 19. Corn, soybeans, wheat and cotton plummeted the maximum allowed by U.S. exchanges.

``We had a big sell-off in all commodities yesterday,'' said Commodity Warrants' Hassall. ``But I don't expect crude to push below $140 a barrel. We're still pretty bullish on the energy sector.''

Dollar Forecast

The dollar may fall against the euro before an industry report forecast to show U.S. pending sales of existing homes fell in May by the most in six months.

A weaker dollar prompts investors to buy commodities as a hedge against inflation.

Brent crude oil for August settlement was at $141.91 a barrel, up 4 cents, on London's ICE Futures Europe exchange at 9:23 a.m. Singapore time. The contract fell $2.55, or 1.8 percent, yesterday to $141.87 a barrel. Futures climbed to a record $146.69 on July 3.

To contact the reporter on this story: Christian Schmollinger in Singapore at Christian.s@bloomberg.net