Oil Falls to 2012 Low on Greek Debt, Saudi Call for Drop

Oil fell below $94 a barrel in New York for the first time since December as Europe’s debt crisis worsened and Saudi Arabia’s energy minister said prices should decline further. West Texas Intermediate slid as much as 2.6 percent to the lowest level this year. Brent crude, trading at about $110 a barrel today, should drop to $100 as supply outweighs demand, Saudi Oil Minister Ali al-Naimi said yesterday in Adelaide, Australia. Futures also slipped after Greece failed to agree on a unity government and European Union officials considered the nation’s possible exit from the euro. Hedge funds cut bullish bets on oil by the most in three years, data showed last week. “It’s about Greece and a potential exit from the euro zone, which more and more people expect within months or even weeks,” said Hannes Loacker, analyst at Raiffeisen Bank International AG in Vienna, who correctly predicted last month that oil was set to drop. “And then it’s about fundamentals, with U.S. crude stocks high and demand in the developed world still weak.” Crude for June delivery fell as much as $2.48 to $93.65 a barrel in electronic trading on the New York Mercantile Exchange, the lowest front-month intraday price since Dec. 19. It was at $94.36 at 10:35 a.m. London time. Prices slid 95 cents to $96.13 on May 11 and are down 4.6 percent this year. Brent for June settlement tumbled $1.78, or 1.6 percent, to $110.48 a barrel on the London-based ICE Futures Europe exchange. The North Sea crude ended the May 11 session at $112.26, the lowest for a contract closest to expiration since Feb. 2. The European benchmark contract’s premium to WTI was at $16.15 a barrel today. Technical Trend Oil in New York closed last week below a technical support line along the 200-day moving average, which is at $96.26 a barrel today, according to data compiled by Bloomberg. That’s a signal to traders who base decisions on historical price patterns that the contracts may fall further. Supply outweighs demand by 1.3 million to 1.5 million barrels a day, according to al-Naimi. Consumption may rebound in the second half of 2012, he said. Saudi Arabia, the world’s biggest crude exporter, pumped 10.1 million barrels a day in April, about 200,000 barrels more than the previous month and the highest in more than three decades, a report by the Organization of Petroleum Exporting Countries showed May 10. “We want a lower price than where it is now,” al-Naimi said. “We need to get the price to a level of around $100” a barrel for Brent. Recovery Threat Saudi Arabia is optimistic that it will discover more oil and gas in the Red Sea and increase recovery rates, al-Naimi said at a conference. The country plans to boost the amount of crude that it can extract from its biggest producing fields to 70 percent from 50 percent currently, he said. Crude prices are high because of global instability, and the European Union sanctions against Iran that take effect from July 1 are already factored in, Christophe de Margerie, Total SA (FP)’s chief executive officer said at the conference. Oil prices at a “high” level pose a threat to the global economic recovery, Maria Van der Hoeven, the executive director of the International Energy Agency, said in a video presentation at the conference. Hedge funds cut bullish oil bets by the most in three years the week before the Seaway pipeline begins to ease a stockpile glut, while rising output and concern over Europe’s financial woes sent prices tumbling.