Oil drops a second day before European leaders meet

Oil dropped for a second day as investors weighed the likelihood that European Union leaders can stem the region’s debt crisis, while nuclear energy inspectors met Iranian officials in Tehran. Futures slipped as much as 0.8 percent Monday in New York as stocks dropped and the dollar strengthened. International Atomic Energy Agency inspectors arrived in Tehran Sunday for talks on Iran’s nuclear program. EU chiefs will gather in Brussels Monday to complete a German-led deficit-control treaty and endorse a 500 billion-euro ($660 billion) rescue fund. Greece and its private creditors said Jan. 28 they expect to complete a write-off deal in the coming days. “The significance is broader than Greece,” said Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore, the industry consultant owned by IHS Inc. “It’s about slower economic growth in Europe.” Crude for March delivery fell as much as 82 cents to $98.74 a barrel in electronic trading on the New York Mercantile Exchange. It was at $99.10 at 4:35 p.m. Singapore time. The contract declined 14 cents to $99.56 on Jan. 27, the lowest close since Jan. 25. Prices are 0.1 percent lower this month. Brent oil for March settlement was at $111.06 a barrel, down 40 cents, on the London-based ICE Futures Europe exchange.

The European benchmark contract’s premium to West Texas Intermediate futures was at $12.16, compared with $11.90 on Jan. 27 and a record $27.88 on Oct. 14. Asia stocks fell, with a regional benchmark index dropping from a three-month high. The MSCI Asia Pacific Index decreased 0.7 percent to 122.16 as of 3:24 p.m. in Tokyo. The euro declined against the dollar, sliding 0.4 percent to $1.3169 as of 6:35 a.m. in London from the Jan. 27 close in New York. Efforts to hold the 17-member euro area together with more stringent fiscal rules are colliding with negotiations in Greece, where the debt crisis began in 2009. Greek bondholders have been pushed to cede more ground after agreeing last year to a 50 percent cut in the face value of more than 200 billion euros of debt.

“The fact we’re still at the beginning of 2012 talking about Greece is a sign this problem hasn’t been dealt with,” UK Chancellor of the Exchequer George Osborne said at the World Economic Forum in Davos, Switzerland. Iran, the second-biggest member of the Organization of Petroleum Exporting Countries, has been at loggerheads with Western countries over accusations its nuclear program is a cover for developing weapons, a charge the government denies. EU foreign ministers agreed on Jan. 23 to ban Iranian oil imports starting in July and freeze the assets of its central bank. Iranian lawmakers are drafting legislation that calls on the government to halt oil exports to Europe as long as the import ban is in place, Fars news agency reported Sunday.

The bill would also require Iran to block imports from countries participating in the EU ban, said Nasser Sodani, deputy head of the parliament’s energy commission. Saudi Arabia indicated at a weekend meeting in Istanbul of Turkey and the six member nations of the Gulf Cooperation Council that it could step in if other countries get less oil from Iran, the Financial Times reported. “There seems like a delay in Iran’s plan to halt oil sales,” Shum said. “The visit by the IAEA will likely add volatility to the oil market over the next few days, depending on what they say.”

A cut in oil imports from Iran is likely to hurt South Korea’s economy, Finance Minister Bahk Jae Wan said Monday in Seoul. The nation needs a “gradual approach” to cuts in the Iranian oil imports, Bahk said. Hedge funds and other large speculators raised bullish oil wagers by 10,079, or 5.2 percent, to 204,044 contracts in the seven days ended Jan. 24, according to the Commodity Futures Trading Commission’s Commitment of Traders report on Jan. 27.


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