Oil falls near $82 on Greek downgrade, U.S. oil glut
Posted by eastinflatables on Wednesday, April 28, 2010
Concern over rising Launch Pad crude stocks creating a glut in the U.S. Midwest also helped push Europe's Brent crude to its highest premium versus U.S., West Texas Intermediate (WTI) futures since August, 2009, and pressured front-month WTI to its biggest discount to second-month barrels since December.
Standard & Poor's cut Greece's credit rating to junk status minutes after downgrading Portugal, the latest sign that European economies face worsening debt woes as they struggle to emerge from an economic downturn.
The turmoil portends negatively for fuel demand in a key consumption region. The euro extended losses versus the dollar following the downgrades. .DXY
U.S. crude for June delivery fell $1.76 to settle at $82.44 a barrel, while ICE June Brent crude traded down $1.05 at $85.78.
Brent earlier traded at as much as $3.51 a barrel higher than WTI, the biggest premium in more than eight months.
Brent's advantage was exacerbated by weakness in the June NYMEX crude contract, which settled at a $2.56 a barrel discount, or contango, to July barrels after reaching the widest discount since December earlier Tuesday.
The widening NYMEX crude contango is being driven by a perceived crude glut at landlocked Cushing, Oklahoma, where the barrels are delivered and stocks have risen steadily since mid-March.
A firming dollar has also helped to weaken crude, priced in dollars, by making it more costly for holders of foreign currencies.
"The Greek crisis, which is really a currency crisis, is likely to get even worse over time," said Joseph Arsenio of Arsenio Capital Management in Larkspur, California.
"As the euro comes under pressure, demand could be affected."
Most analysts in a Reuters poll expected data on Tuesday and Wednesday would show that U.S. crude stocks rose for a second week last week, by 1 million barrels, as imports increased. <EIA/S>
Inventories in the U.S. Midwest region are already at their highest levels in at least two decades, according to U.S. Energy Information Administration data.
"Cushing is getting full and my sense is this has started having greater significance for (NYMEX) WTI prices, weakening them relative to other crude," said Arsenio.
Standard & Poor's cut Greece's credit rating to junk status minutes after downgrading Portugal, the latest sign that European economies face worsening debt woes as they struggle to emerge from an economic downturn.
The turmoil portends negatively for fuel demand in a key consumption region. The euro extended losses versus the dollar following the downgrades. .DXY
U.S. crude for June delivery fell $1.76 to settle at $82.44 a barrel, while ICE June Brent crude traded down $1.05 at $85.78.
Brent earlier traded at as much as $3.51 a barrel higher than WTI, the biggest premium in more than eight months.
Brent's advantage was exacerbated by weakness in the June NYMEX crude contract, which settled at a $2.56 a barrel discount, or contango, to July barrels after reaching the widest discount since December earlier Tuesday.
The widening NYMEX crude contango is being driven by a perceived crude glut at landlocked Cushing, Oklahoma, where the barrels are delivered and stocks have risen steadily since mid-March.
A firming dollar has also helped to weaken crude, priced in dollars, by making it more costly for holders of foreign currencies.
"The Greek crisis, which is really a currency crisis, is likely to get even worse over time," said Joseph Arsenio of Arsenio Capital Management in Larkspur, California.
"As the euro comes under pressure, demand could be affected."
Most analysts in a Reuters poll expected data on Tuesday and Wednesday would show that U.S. crude stocks rose for a second week last week, by 1 million barrels, as imports increased. <EIA/S>
Inventories in the U.S. Midwest region are already at their highest levels in at least two decades, according to U.S. Energy Information Administration data.
"Cushing is getting full and my sense is this has started having greater significance for (NYMEX) WTI prices, weakening them relative to other crude," said Arsenio.