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By Lananh Nguyen and Ben Sharples
NEW YORK - Oil dropped in New York as rising Spanish borrowing costs pushed the dollar higher, adding to concern that Europe’s debt crisis will curb crude demand.
Futures fell as much as 1.5 percent in New York after the Spanish 10-year bond yield rose to a euro-era record of 7.14 percent. Greece’s New Democracy and Pasok parties won enough seats to form a majority in the 300-member parliament, according to an official projection.
Money managers cut bullish oil wagers for a sixth week, according to the Commodity Futures Trading Commission’s Commitment of Traders Report.
“Investors should remain cautious until Greece forms a government that could stabilize the markets for the short-medium term,” Myrto Sokou, an analyst at Sucden Financial Ltd. in London, said by e-mail.
Oil for July delivery fell as much as $1.38 cents to $82.65 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.84 at 1:35 p.m. London time.
Brent crude for August settlement dropped $1.40 cents to $96.21 a barrel on the London-based ICE Futures Europe exchange. The front-month European benchmark contract was at a $13.15 premium to West Texas Intermediate, down from $13.28 on June 15.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, rose as much as 0.3 percent. A strengthening dollar pushes up the cost of commodities priced in the U.S. currency.
Oil in New York has technical support along its 200-week moving average, around $80.65 a barrel today. Futures halted last week’s decline near that indicator. Buy orders tend to be clustered close to chart-support levels.
“The victory of the austerity program’s supporters in the Greek parliamentary elections has lent a modicum of buoyancy to crude oil prices,” Eugen Weinberg, head of commodity research at Commerzbank AG in Frankfurt, said in a note. “That said, some of these gains have already been shed again, underlining the continuing skepticism among market players.”
The death of Crown Prince Nayef bin Abdulaziz Al Saud in Saudi Arabia, the world’s largest crude exporter, raised the issue of succession for the second time in less than a year. Nayef’s death leaves Prince Salman bin Abdulaziz as a leading contender for the crown prince position, as the kingdom grapples with high youth unemployment and security issues, including the threat of al-Qaeda militants and historic political change in the Middle East.
The kingdom will ensure adequate supply in the global crude market, Oil Minister Ali al-Naimi said in a June 15 interview, a day after the Organization of Petroleum Exporting Countries kept its output ceiling unchanged at 30 million barrels a day.