OIL SLIDES AFTER EUROPE WITHHOLDS GREEK AID
Oil fell, erasing earlier gains, on speculation that Greece's referendum on a bailout agreement threatens to intensify the European debt crisis and derail the region's economy. Futures slid as much as 1.8 per cent after leaders in Europe severed aid payments to Greece and raised the prospect of the euro area splintering if the nation votes against a rescue package agreed to last week.
Brent crude's technical indicators are bearish in the near-term amid 'significant' downside risks to demand, according to Standard Chartered Plc.
U.S. oil and gasoline inventories rose more than forecast last week. 'An escalation in Europe would cause the oil price to fall,' Colin Whitehead, an analyst at Fat Prophets, said. 'Sentiment is a huge driver of the price at present.'
Crude for December delivery fell as much as $1.64 to $90.87 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.36 in Singapore. The contract gained 32 cents yesterday to close at $92.51, the highest settlement since October 31.
Brent for December settlement traded $1.25 lower at $108.09 a barrel on the London-based ICE Futures Europe exchange. Brent's premium to New York crude was $16.73 a barrel, compared with $16.83 and a record $27.88 on October 14.
U.S. crude supplies increased 1.83 million barrels to 339.5 million in the week ended October 28, the U.S. Energy Department said. That was more than the 1 million barrels forecast by analysts Gasoline stockpiles gained 1.36 million barrels to 206.3 million. The median estimate was a decline of 800,000. Inventories of distillate fuels, which include heating oil and jet fuel, dropped 3.58 million barrels to 141.9 million.
The median estimate was a decline of 1.75 million. Oil was also weighed down by a report showing China's non- manufacturing industries grew at a slower pace in October. A purchasing managers' index fell to 57.7 from 59.3 in September, the China Federation of Logistics and Purchasing said on its website. The gauge includes construction.
'We are a little bit cautious on China because it is going through a slowdown story as well,' said Selena Ling, head of treasury research at Oversea-China Banking Corp. in Singapore. 'People are trying to gauge how much of a slowdown we may see.'
In Europe, leaders chose to treat Greece's referendum on the bailout package as an in-or-out vote on the debt-stricken nation's future in the currency union. The poll may be held on Dec. 4, according to Greek Prime Minister George Papandreou.