Brent crude declined for a third day in London as investors bet that Europe's worsening debt crisis may slow the economy and crimp fuel demand.
Brent dropped as much as 1 per cent before European leaders hold a special summit this week after eight of the region's banks failed stress tests. Concern that the crisis is spreading pushed the euro lower against the dollar, limiting the appeal of commodities priced in the US currency. Tropical Storm Bret formed north of the Bahamas as the second cyclone of the Atlantic hurricane season.
"The market has retreated this morning as the dollar has strengthened, making the general outlook for commodities less positive," said Christopher Bellew, senior broker at Jeffries Bache in London. "Brent prices have been confined to a broad range of $105 to $120, but within that there's a lot of unpredictability."
Brent for September settlement fell as much as $1.14 to $116.12 a barrel on the ICE Futures Europe exchange and was at $116.30 at 1:42pm London time. The contract dropped 0.4 per cent last week. Prices are 54 per cent higher the past year.
Crude for August delivery was at $96.06 a barrel, down $1.18, in electronic trading on the New York Mercantile Exchange. Futures increased 1.1 per cent last week and are 27 per cent higher the past year.
"Our global view is that we've hit a temporary patch of weakness in demand growth and in the next few months we expect that to turn around, notwithstanding some sort of big financial event or some further blow-up of this sovereign debt situation," said Ben Westmore, a minerals and energy economist at National Australia Bank in Melbourne, who predicts oil in New York will average $113 a barrel in the third quarter.
Net-long positions, or bets on rising prices, in crude advanced 2 per cent to 168,833 in the seven days ended July 12, according to the Commodity Futures Trading Commission's Commitments of Traders report.
Oil in New York may continue to face technical resistance around $98 a barrel, near a one-year Fibonacci retracement level and the 50-day moving average, according to data compiled by Bloomberg. A breach of technical resistance usually means the market will advance further.
Brent's losses outpaced US futures yesterday, narrowing the difference between the front-month European benchmark contract and New York prices to a premium of $19.91 a barrel, compared with the record settlement of $22.63 on Thursday.
Tropical storm Bret, loc-ated about 150km northwest of Great Abaco Island, has sustained winds of almost 40 miles per hour with some higher gusts, the US National Hurricane Centre said in an advisory at 11pm Miami time on Sunday. Force winds are extending outward up to 35 miles from the centre, it said.
Alyeska Pipeline Service restarted the Trans Alaska Pipeline on Sunday after maintenance on two of the crude link's pumping stations, Michelle Egan, a spokeswoman for Alyeska, said in an e-mail.
The Anchorage, Alaska-based company halted operations south of Prudhoe Bay on Saturday to replace valves at Pump Station 4 and to straighten a pipe at Pump Station 11.
From / Gulf News