Oil drops to lowest in 3 months on economic outlook concern
OIL TRADED AT A three month low in New York on concerns about the global economic outlook.
BLOOMBERG FILE PHOTO
By Rupert Rowling Bloomberg News
LONDON - Crude dropped below $87 a barrel to the lowest in almost three months in New York while London’s Brent futures fell for a sixth session as companies missed sales forecasts leading to concern about the global economic outlook.
Futures for December delivery tumbled as much as 2 percent. Brent fell as much as 0.9 percent to the least since Oct 4. Companies such as Posco, Asia’s third-largest steelmaker, and Faurecia, Europe’s largest maker of car interiors, revised down estimates. The Keystone oil pipeline won’t resume full deliveries until next month after a halt.
“There is a correlation between the equity markets and the oil price,” Michael Hewson, a London-based analyst at CMC Markets, said today by phone. “We’ve had various companies missing price forecasts and these concerns about the future outlook for earnings is keeping a lid on oil prices.”
Crude lost $1.66 to $86.99 a barrel in electronic trading on the New York Mercantile Exchange as of 1:40 p.m. in London. Front-month futures are at the cheapest on an intraday basis since Aug. 2. The November contract fell 1.5 percent yesterday to $88.73, the lowest close since Oct. 3. Prices are down 12 percent this year.
Brent for December settlement was 91 cents lower at $108.53 a barrel on the London-based ICE Futures Europe exchange after losing 70 cents to settle at $109.44 yesterday. The European benchmark’s premium to the New York-traded West Texas Intermediate grade widened to $21.54 from $20.79 yesterday.
Faurecia cut its 2012 profit outlook, forecasting a decline in fourth-quarter European sales on a “significant” slowdown in auto production. Posco reduced its 2012 sales forecast for the third time this year after quarterly profit missed analyst estimates as demand waned and prices slid.
The 590,000 barrel-a-day Keystone pipeline started yesterday, James Millar, a TransCanada Corp. spokesman based in Calgary, said in an e-mail. Keystone will operate at reduced pressure for 24 hours or less to complete additional testing, Millar said. TransCanada will trim October volumes and return to contractual delivery levels in November.
TransCanada shut Keystone on Oct. 17 after routine maintenance testing revealed an “anomaly” on the outside of the link. The pipe runs 2,150 miles (3,459 kilometers) from Hardisty, Alberta, to Wood River and Patoka, Illinois, and to the main U.S. oil storage hub in Cushing, Oklahoma.
U.S. oil inventories probably advanced for a third week after crude output climbed to the highest level in more than 17 years, according to the median of nine analyst estimates before an Energy Department report tomorrow.
Crude inventories grew by 1.8 million barrels, or 0.5 percent, to 371 million in the seven days ended Oct. 19, the Bloomberg survey showed. A gain of that size would leave stockpiles at the highest level since July.
Tropical Storm Sandy was forecast to become a hurricane tomorrow as it lingered over the southwestern Caribbean Sea, while a second system began to develop in the Atlantic.
Sandy, with top winds of 45 miles per hour, was about 325 miles south-southwest of Kingston, Jamaica, according to a U.S. National Hurricane Center advisory at 8 a.m. New York time. The system is forecast to pass east of Florida.
Sandy is the 18th named storm of the Atlantic hurricane season, which ties 2012 with 1969 as the fourth-most active on record. A 19th storm is expected to develop from a tropical depression 825 miles northeast of the Leeward Islands, with winds of 35 mph. It’s not forecast to reach the U.S.
Iran will suspend all fuel exports, causing a sharp increase in global crude prices, if the U.S. tightens sanctions further on its economy, Oil Minister Rostam Qasemi said.
“If you continue to add to the sanctions, we will stop our oil exports to the world,” he said at a news conference in Dubai. “The lack of Iranian oil in the market would drastically add to the price.”
Gasoline also fell, dropping 2 percent to $2.5955 a gallon in New York. Futures have fallen 22 percent this month, compared with a 5.6 percent slide in crude.
Prices were down for a ninth day, the longest series of declines since October 2005, on speculation that supplies will increase as refineries start units after repairs.
Gasoline futures sank to close at the lowest level since July 2 as Exxon Mobil Corp. resumed operations on a coker at the Joliet, Illinois, refinery after an Oct. 19 upset. Valero Energy Corp. and Citgo Petroleum Corp. are starting units following maintenance at the McKee and Corpus Christi, Texas, plants.