Oil fell to the lowest level in two weeks in New York Thursday as European Central Bank President Mario Draghi said the euro’s strength could hamper an economic recovery, curbing fuel demand.
West Texas Intermediate oil dropped 0.8 percent as the euro slumped for a second day against the dollar. The European Union accounted for 16 percent of global oil use in 2011, according to BP Plc’s Statistical Review of World Energy. WTI’s discount to Brent oil in London widened for a seventh day. U.S. crude supplies rose 2.62 million barrels last week to 371.7 million, the most since Dec. 7, the government said Wednesday.
“Slower growth in Europe means slower exports and weak oil demand,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “The euro is getting hammered and oil is following suit.”
WTI oil for March delivery slid 79 cents to $95.83 a barrel on the New York Mercantile Exchange, the lowest settlement since Jan. 23. Volume was 52 percent above the 100-day average at 3:22 p.m. Prices have decreased 2 percent this week.
ECB policy makers are concerned that an advance in the euro, which gained 2.5 percent this year through Wednesday, could stymie a recovery before it has begun by curbing exports and damping inflation, Draghi said. They “want to see if the appreciation is sustained,” he said.
The euro dropped as much as 1.1 percent today. A weaker euro and stronger dollar reduce oil’s appeal as an investment alternative.
Brent for March settlement climbed 51 cents, or 0.4 percent, to $117.24 a barrel on the ICE Futures Europe exchange. Volume was 39 percent above the 100-day average. Europe’s benchmark grade advanced as much as 0.9 percent after Iran said it won’t be coerced into holding direct talks with the U.S.
Brent was at a $21.41-a-barrel premium to WTI based on settlement prices, the widest spread since Dec. 14.
“It’s the spread at work,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There is certainly a significant rally in the dollar.”
The gap has grown since Enterprise Products Partners LP said Jan. 31 that capacity on the Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, where the WTI contract is delivered, will be limited until late 2013.
Stockpiles at Cushing are the highest for this time of year in Energy Information Administration records dating back to 2004. They fell 315,000 barrels last week to 51.4 million, according to a report yesterday from the EIA, the Energy Department’s statistical arm. Cushing inventories reached a record 51.9 million barrels on Jan. 11.
Crude also fell as more Americans than expected applied for jobless benefits last week. Jobless claims reached 366,000, exceeding the 360,000 forecast by economists surveyed by Bloomberg. Claims declined from the prior week, returning to levels seen in the second half of 2012.
“The employment situation is still rather bleak,” said Tom Doremus, an analyst at Tradition Energy in Stamford, Connecticut.
The U.S. accounted for 21 percent of world oil demand in 2011, according to BP.
Total petroleum demand in the U.S. dropped 3.4 percent last week to 18.1 million barrels a day, the EIA reported Wednesday. Gasoline consumption decreased 1 percent to 8.42 million barrels a day.
“We see the market as still quite well supplied,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in an e-mail.
WTI climbed as much as 0.6 percent earlier as Iran’s Supreme Leader Ayatollah Ali Khamenei said negotiations with the U.S. “won’t solve a thing.”
“The U.S. holds a gun at Iran and says we need to negotiate,” Khamenei, the highest authority in Iran and the ultimate decision maker in the state’s affairs, said at a meeting of air force commanders.
Foreign Minister Ali Akbar Salehi said earlier this week that Iran considers an offer by U.S. Vice President Joe Biden to negotiate directly over its nuclear program a “step forward.”
“The Iran news is significantly bullish to the market,” Tradition Energy’s Doremus said. “The notion of easing tensions in the Gulf is gone.”
Iran pumped 2.6 million barrels of oil a day in January, the lowest level since February 1990, a Bloomberg survey of oil companies, producers and analysts showed. Iran, the Organization of Petroleum Exporting Countries’ biggest producer after Saudi Arabia a year ago, is now tied with the United Arab Emirates for fifth place.
Sanctions aimed at stopping the Islamic republic’s nuclear program have hindered its ability to export crude oil. A European Union ban on the purchase, transport, financing and insurance of Iranian oil came into effect on July 1.
Electronic trading volume on the Nymex was 690,400 contracts as of 3:23 p.m. It totaled 791,245 contracts Wednesday, 53 percent above the three-month average. Open interest was 1.6 million, the highest level since Nov. 8.
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