Oil dropped from the highest level in more than three months after U.S. crude stockpiles increased and a surge in Italian bond yields stoked speculation Europe is struggling to contain its debt crisis.
West Texas Intermediate futures fell as much as 0.8 percent
after yesterday settling at the highest price since July 26.
Italy’s 10-year-bond yield closed for the second time in a week
above the 7 percent threshold that prompted Greece, Ireland and
Portugal to seek European Union bailouts. Crude inventories rose
last week, the American Petroleum Institute said. An Energy
Department report today may show they fell 1.2 million barrels,
according to a Bloomberg News survey.
“We’re seeing a slight softening,” said Michael McCarthy,
a chief market strategist at CMC Markets Asia Pacific Pty. in
Sydney. “It looks like a bit of profit taking as we approach
that important technical level just below $100.”
Crude oil for December delivery slid as much as 76 cents to
$98.61 a barrel in electronic trading on the New York Mercantile
Exchange and was at $98.67 at 1:38 p.m. Sydney time. Prices
advanced $1.23 to $99.37 yesterday and have gained 20 percent in
the past year.
Brent oil for January settlement fell 55 cents, or 0.5
percent, to $111.63 a barrel on the London-based ICE Futures
Europe exchange. The European contract’s premium to West Texas
crude was at $12.87, after yesterday settling at $13.02, the
narrowest difference since May 24. The spread is down 54 percent
from a record $27.88 on Oct. 14.
Technical Resistance
Oil’s rally in New York is stalling as the 14-day relative
strength index remains near 70, according to data compiled by
Bloomberg. A reading at this level signals prices may have risen
too quickly and further gains aren’t sustainable.
Crude stockpiles rose 1.3 million barrels last week,
according to the API, which collects stockpile information on a
voluntary basis from operators of refineries, bulk terminals and
pipelines. The government requires that reports be filed with
the Energy Department for its weekly survey.
Italy’s 10-year-bond yield jumped 37 basis points to 7.07
percent, while Spain and Belgium sold less than the maximum
target of bills at auctions as financing costs increased.
To contact the reporter on this story:
Ben Sharples in Melbourne at
bsharples@bloomberg.net
To contact the editor responsible for this story:
Alexander Kwiatkowski in Singapore at
akwiatkowsk2@bloomberg.net