Oil drops below $89 on Spain, China worries

[WallyWeaver]

Well, on the plus side, at least the price of gas won't be going up for at least a month.

Oil drops below $89 on Spain, China worries

Fears over Spain, scaled back China stimulus hopes weigh futures

May 30, 2012, 11:00 a.m. EDT

By Myra P. Saefon and V. Phani Kumar, MarketWatch

SAN FRANCISCO (MarketWatch) — Crude-oil futures dropped below $89 a barrel Wednesday as concerns over Spain and scaled-back expectations for Chinese economic stimulus lifted the U.S. dollar, fueling broad losses among commodities.

The July contract for light, sweet crude-oil futures fell $2.71, or 3%, to $88.05 a barrel on the New York Mercantile Exchange after touching a low of $87.98. A close below $89 would be the lowest since October.

The drop came as the ICE dollar index, which measures the greenback against a basket of six global currency counterparts, rose to 82.790 from 82.468 in North American trade Tuesday. It’s trading at its highest level in nearly two years.

The euro, meanwhile, fell to $1.2416 from $1.2493 late Tuesday.

Investors were generally pulling out of risk assets as lingering concerns about Spain’s finances stoked fears about the euro zone. The country saw bond yields surge after Egan-Jones Ratings Co., on Tuesday after the European markets closed, downgraded Spain to B from BB- with a negative outlook, pushing Spanish debt further into junk status.

The Spanish downgrade “reminds everyone that the European problems are about far more than Greece,” said Matthew Parry, a senior oil-market analyst at the International Energy Agency

U.S. and European stocks traded sharply lower, with the Dow Jones Industrial Average losing more than 128 points as Spain’s bond yields climbed and data on U.S. pending-home sales showed a decline for April.

Asian markets mostly declined as some expectations for action from Beijing were scaled back after state-run media reported Tuesday that Chinese authorities won’t resort to aggressive stimulus to stabilize growth.

State media also cited several senior Chinese economists as saying any stimulus the government provided would be mild compared with the one launched in late 2008.

Elsewhere in the energy complex, June gasoline prices lost 6 cents, or 2%, to $2.85 per gallon, and heating oil for delivery in the same month slipped 6 cents, or 2.2%, to $2.75 per gallon.

The American Petroleum Institute will release its weekly data on petroleum supplies Wednesday, a day late due to Monday’s Memorial Day holiday, and the U.S. Energy Information Administration will release its own data Thursday at 11 a.m. Eastern.

Analysts polled by Platts expect that supplies of crude oil climbed by 100,000 barrels for the week ended May 25. They also forecast unchanged inventories of gasoline and a rise of 150,000 barrels in distillate stocks.

Rounding out action in the energy markets Wednesday, July natural-gas futures, on its first full day as a front-month contract, gave up 5 cents, or 1.9% to $2.44 per million British thermal units.

Link: http://www.marketwat...rrel-2012-05-29