Crude Concerns

From Bloomberg:

Crude Oil Falls on Europe Debt Concerns

Oil declined in New York as concern that Europe’s debt crisis will hurt economic growth outweighed forecasts that U.S. crude stockpiles dropped last week.

U.S. crude inventories declined 2 million barrels, or 0.6 percent, in the seven days ended Nov. 19 from 357.6 million a week earlier, according to the median of 11 analyst estimates before an Energy Department report tomorrow. Yields on Spanish and Portuguese debt rose, indicating that Ireland’s plan to seek a rescue risks escalating the crisis to the southern Europe nations with large budget deficits.

“With crude stocks still plentiful, it will take a sharp move in equities or the dollar to break oil out of its tight range,” said Andrey Kryuchenkov, an analyst with VTB Capital in London.

Crude for January delivery fell as much as $1.46, or 1.8 percent, to $80.28 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.65 at 1:44 p.m. London time. Brent crude for January settlement also dropped as much as $1.46 to $82.50 a barrel on the London-based ICE Futures Europe exchange.

Oil recouped some losses as South Korea scrambled fighter jets and returned fire after nuclear-armed North Korea lobbed dozens of shells into its territory, injuring 14 soldiers, according to the government and YTN reports.

A South Korean Defense Ministry official, who declined to be identified, confirmed the shelling. The military has been put on high alert and will “respond strongly” to further provocation, he said.

‘Credit Negative’

Ireland became the second euro country to seek a rescue as the cost of saving its banks threatened a repeat of the Greek debt crisis that destabilized the currency. Moody’s Investors Service said yesterday that a bailout by the European Union and the International Monetary Fund may raise the debt burden and pose a “credit negative” for the country.

“Besides Ireland, people are worried about Spain and Portugal so oil futures are following the focus on the euro zone,” said Victor Shum, a senior principal at energy consultants Purvin & Gertz Inc. in Singapore. “Any financial trouble would slow down the economic recovery and could impact fuel demand.”

Comments:

As we forecast back in January, we expect crude oil to decline further to the $50 to $60 range if we are indeed in a deflationary period. We also expect industrial commodities to fall, such as copper as the reality of the bank induced sovereign debt crisis deepens.


I am in meetings for two days, so will not be posting until then.
Best to all.