Oil retreated from near its highest in three months as European stocks pared gains and the region’s single currency declined, signaling renewed concern that the debt crisis will damage economic growth.
West Texas Intermediate futures erased an earlier gain, following yesterday’s rally to the highest price since July 26. The Stoxx Europe 600 Index was unchanged as of 10:46 a.m. in London after gaining 1.2 percent. The euro was 0.3 percent weaker against the dollar at $1.3498.
“For quite a long time the oil price has correlated well with events in the sovereign debt crisis,” said Torbjoern Kjus, an Oslo-based senior market analyst at DnB NOR, who predicts the price of Brent crude will average $105 a barrel this quarter. “I would not be surprised to see prices falling back more. We are risking a banking crisis.”
Crude oil for December delivery on the New York Mercantile Exchange was down 41 cents at $98.96 a barrel at 10:49 a.m. London time. Earlier it lost as much as 98 cents. Prices rose as high as $99.84 yesterday.
Pound Declines on BOE Growth Outlook While Gilt Yield Falls to Record Low
The pound weakened versus the dollar as the Bank of England said Britain faces a “markedly weaker” outlook for economic growth, signaling it may expand stimulus.
U.K. 10-year gilt yields fell to a record after data showed U.K. unemployment rose in the three months through September and joblessness among young people climbed above 1 million for the first time since at least 1992. Growth may be “broadly flat” in the first half of 2012, central bank Governor Mervyn King said in a press conference after the quarterly Inflation Report. “There is no meaningful way to quantify the most extreme outcomes associated with developments in the euro area,” he said.
“Growth outlook remains a major risk to the pound,” said Chris Walker, a currency strategist at UBS AG in London. “The Bank of England’s downward revision of their growth forecast is realistic in our view. They didn’t predict a recession, but if the euro region’s situation deteriorates further, that’s a scenario the market can’t rule out.”
The pound fell 0.3 percent to $1.5776 at 11:52 a.m. London time. Sterling was 0.2 percent stronger at 85.38 pence per euro, after appreciating 0.4 percent to 85.20 pence. It dropped 0.4 percent to 121.44 yen.
U.K. Unemployment Soars, Jobless Young Top 1M
U.K. unemployment jumped in the third quarter as joblessness among young people climbed above 1 million for the first time since at least 1992.
Unemployment as measured by International Labour Organization standards rose by 129,000 to 2.62 million, the most since 1994, the Office for National Statistics said in London today. The jobless rate climbed to a 15-year high of 8.3 percent. The number of unemployment-benefit claims rose 5,300 to 1.6 million in October. Economists had forecast an increase of 21,000, according to the median of 24 estimates in a Bloomberg News survey.
