Crude Oil Falls as U.S. Consumer Confidence Drops to Three-Decade Low
Crude oil declined after a report showed confidence among U.S. consumers plunged in August to the lowest level in 31 years, signaling that economic growth may drop in the world’s biggest oil-using country.
Oil fell 0.4 percent after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. Futures rose as much as 1.9 percent earlier when the Commerce Department said retail spending increased 0.5 percent following a 0.3 percent gain in June that was larger than previously estimated.
“Economic concerns continue to be the primary driver of the oil market,” said Kyle Cooper, director of research for IAF Advisors in Houston. “It’s been quite a ride this week and the market ended up slightly lower. It’s important to keep in mind that we’re up quite a bit from the lows.”
Crude oil for September delivery dropped 34 cents to settle at $85.38 a barrel on the New York Mercantile Exchange. The contract decreased 1.7 percent this week after ranging from $75.71 to $87.37 a barrel.
Brent oil for September settlement rose 1 cent to end the session at $108.03 a barrel on the London-based ICE Futures Europe. The European benchmark was at a premium of $22.65 to U.S. futures at the close today, down from a record $23.79 on Aug. 10 based on settlement prices.
The consumer sentiment gauge was projected to decline to 62, according to the median forecast of 69 economists surveyed by Bloomberg News. The Bloomberg Consumer Comfort Index also fell, dropping to minus 49.1 in the period to Aug. 7, its lowest level since mid-May.
French Economic Growth
Prices dropped as much as 2 percent before floor trading opened at 9 a.m. in New York after France’s economy failed to grow in the second quarter and manufacturing in the euro region unexpectedly declined in June.
Growth in France stalled as consumer spending plunged, Paris-based statistics office Insee said today. Gross domestic product was unchanged from the first quarter, when it rose 0.9 percent, the most in four years.
Industrial production in the euro region fell in June, the European Union’s statistics office in Luxembourg said today. The 0.7 percent decline was led by a drop in capital goods such as machinery, adding to signs the economy is losing momentum as governments struggle to contain the debt crisis.
French President Nicolas Sarkozy and German Chancellor Angela Merkel plan to meet next week after French markets were rattled by concern that the euro-area debt crisis will spread. The leaders of Europe’s two largest economies will discuss economic governance of the 17-nation euro region in Paris on Aug. 16, according to separate statements yesterday.
‘The Driving Factor’
“Fear is the driving factor,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, whose forecast for prices in the second quarter was third-closest among 29. “In the last few years things have hardly been worse than they are now. We have extremely low growth from the U.S., a slowdown in China, definitely troubles in the euro zone.”
A cluster of thunderstorms 200 miles north of Bermuda, one of four Atlantic systems being monitored by the National Hurricane Center, has a 60 percent chance of becoming a tropical depression or tropical storm in the next 48 hours, the center said at 2 p.m. New York time.
Storm Watch
A system 1,000 miles east of the northern Leeward Islands has a 50 percent chance of development, the center said. Traders follow tropical storm forecasts in the Atlantic because the storms can move into the Gulf of Mexico, damage oil platforms and refineries, and delay fuel shipments.
“Prices have held up pretty well,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We may have slipped at the end of the day because the storms in the Atlantic are unlikely to move into the Gulf.”
New York oil may gain next week as U.S. stockpiles decline and fuel demand increases, according to a Bloomberg News survey. Twelve of 29 analysts and traders, or 41 percent, forecast crude will increase through Aug. 19. Last week, 51 percent of respondents predicted a decrease.
Oil volume in electronic trading on the Nymex was 602,403 contracts as of 4:26 p.m. in New York. Volume totaled 1.04 million contracts yesterday, 50 percent above the average of the past three months. Open interest was 1.58 million contracts.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
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