Crude Declines To 10-Month Low On U.S. Rating Downgrade, Rising Stockpiles
Aug 8, 2011 1 Comment ›› Angelia
Oil dropped below $80 a barrel in New York, falling to the lowest in more than 10 months, as the U.S. credit rating cut and rising stockpiles stoked concern an economic slowdown will worsen, reducing fuel demand in the world’s biggest crude consumer.
Futures slipped as much as 3.3 percent today, following a 6.4 percent plunge yesterday. U.S. equities slumped the most since December 2008 in the first trading session since Standard & Poor’s Aug. 5 downgrade. An Energy Department report tomorrow may show crude inventories climbed for a third week.
“Until we can see some confidence coming back to the U.S. consumer, the situation is probably not going to change that much in terms of another strong price rally,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who kept his forecast for New York crude to average $115 this year. “A recession would obviously have the potential to reduce consumption and that will place pressure on prices.”
Crude for September delivery fell as much as $2.69 to $78.62 a barrel in electronic trading on the New York Mercantile Exchange, the lowest intraday price since Sept. 30. It was at $78.71 at 10:41 a.m. Sydney time. The contract yesterday tumbled $5.57 to settle at $81.31. Prices are down 17 percent in August and 14 percent lower in 2011.
Brent oil for September settlement was at $101.88 a barrel after decreasing as much as $1.97 to $101.77 on the London-based ICE Futures Europe exchange. The European benchmark contract was at a $22.74 premium to U.S. futures, compared with the record close of $22.67 on Aug. 2.
Implied Volatility
New York futures have tumbled 32 percent since reaching a two-year high of $114.83 in intraday trading on May 2. Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options prices, was at 68.7 percent at 3 p.m. in New York, up from 40.9 percent Aug. 5.
The Energy Department report tomorrow may show crude oil supplies increased 1.5 million barrels in the seven days ended Aug. 5 as the government released barrels from the Strategic Petroleum Reserve, according to the median of eight analyst estimates in a Bloomberg News survey. Gasoline inventories probably climbed 900,000 barrels, the survey shows.
The Standard & Poor’s Index lost 6.7 percent to 1,119.46 at the 4 p.m. close in New York, its lowest level since September, as all 500 stocks fell for the first time since Bloomberg began tracking the data in 1996. Japan’s Topix Index fell 3.5 percent at 9:27 a.m. in Tokyo and is headed for its lowest close since March 2009.
