Oil Drops From Seven-Week High on Outlook for Economy

Oil fell from a seven-week high in New York on concern fuel demand may falter after China signaled more economic weakness and analysts cut their profit forecasts for European companies at the fastest rate since 2009. Futures slid as much as 0.7 percent after advancing a fifth day yesterday, the longest run of gains since April. The labor situation in China, the world’s second-biggest crude user, will become more “severe,” Premier Wen Jiabao said, according to a statement on the government’s website. Profits at Euro Stoxx 50 Index companies will rise 6.8 percent this year, more than 12,000 estimates compiled by Bloomberg show. That compares with a 19 percent gain predicted at the start of the year. “I don’t think we have a very strong momentum on the oil market because the economy is not that strong in Europe, the U.S. and China,” said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo. “We would expect some profit taking after five days of gains.” Oil for August delivery dropped as much as 63 cents to $88.59 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.98 at 2:57 p.m. Singapore time. The contract gained 0.9 percent yesterday to $89.22, the highest close since May 29. Prices are down 10 percent this year. Brent crude for September settlement on the London-based ICE Futures Europe exchange declined as much as 78 cents, or 0.8 percent, to $103.22 a barrel. The European benchmark contract was at a $14.41 premium to New York-traded West Texas Intermediate grade, down from $14.46 yesterday. Technical Resistance Oil in New York climbed too quickly for further gains to be sustainable, according to data compiled by Bloomberg. The 30-day stochastic oscillators are above 70 for the first time since March, a level that signals price gains are exaggerated. Sell orders may be clustered near technical resistance along the upper Bollinger Band, around $90 a barrel today.