Crude Trades Near 6-Week Low on Speculation European Crisis to Cut Demand

By Ben Sharples - Sep 26, 2011 10:34 AM GMT+0700

Oil traded near the lowest in more than six weeks in New York as investors speculated Europe’s sovereign debt crisis will cut fuel demand amid ample supplies.

Futures fluctuated close to $80 a barrel after finance leaders at the annual International Monetary Fund meeting in Washington urged European policy makers to step up measures to counter the crisis. The region’s woes have helped slow demand for crude, Qatar’s oil minister said yesterday. Declines may be limited as New York oil approaches technical support levels, according to data compiled by Bloomberg.

“Everyone now fully understands the implications of Greece defaulting,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney. “The big key is whether or not the measures are going to help and I think that’s what we have to wait and see.”

Crude for November delivery was at $79.90 a barrel, down 5 cents, in electronic trading on the New York Mercantile Exchange at 1:31 p.m. Sydney time. Front-month prices last week slid 9.2 percent to $79.85, the lowest settlement since Aug. 9. Oil is 4.4 percent higher the past year.

Brent futures for November settlement slid 19 cents, or 0.2 percent, to $103.78 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $23.88 to U.S. futures, compared with a record $26.87 on Sept. 6, based on front-month settlement prices.

“Adequate” Supply

U.S. Treasury Secretary Timothy F. Geithner said at the IMF meeting that governments and the European Central Bank must defuse the “most serious risk now confronting the world economy.”

The European financial crisis and general fears about the global economy have weakened demand for crude, Qatari Oil Minister Mohammed Saleh al Sada said yesterday in Doha. Supplies are adequate and the nation is pleased that Libya is starting to produce and export oil, he said.

Harouge Oil Operations, a joint venture between Libya’s state-owned National Oil Corp. and PetroCanada, will begin pumping crude from the country’s Amal field in a “few weeks,” the company’s chairman said. Full output of 100,000 barrels a day is expected to be reached by year’s end, Abdulwahab Elnaami said yesterday at his office in the Libyan capital Tripoli.

Fighting in Libya since February has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with the 1.6 million barrels a day the nation pumped in January.

Crude in New York has long-term technical support at $76.28 a barrel on the weekly chart, according to data compiled by Bloomberg. That’s the 38.2 percent Fibonacci retracement of the drop to $32.40 in December 2008 from a record high of $147.27 in July that year. Buy orders tend to be clustered close to chart- support levels.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net