Oil prices fall as concerns ramp up over US economy
International Energy Agency announces intention to release more stock on market
OIL fell amid concern that economic expansion in the US is slowing as consumer spending stagnated last month and after the International Energy Agency said it's prepared to release additional crude from stockpiles.
Crude dropped as much as 1.7pc in New York, and Brent decreased as much as 2.7pc in London after a US report showed consumer spending was little changed last month. The IEA said it will decide in 30 days whether to tap additional stockpiles.
"The market's been struggling because of economic concerns both in the US and globally," said Tom Bentz, a broker with BNP Paribas Commodity Futures in New York. "When these strategic reserves come to the market, they're going to compete directly with Brent crude, which is the market that led us up and is leading us back down again."
Crude for August delivery fell 72 cents, or 0.8pc, to $90.44 a barrel on the New York Mercantile Exchange. Earlier, futures touched $89.61 a barrel. They've tumbled 15pc so far in the second quarter.
Brent oil for August delivery declined 17 cents to $104.95 a barrel on the ICE Futures Europe exchange in London after touching $102.28. Brent, the European benchmark contract, traded at a premium of $14.55 to US futures. The difference between the front-month contracts reached a record $23.32 on June 15.
Consumer spending purchases were little changed in the US in May, the weakest outcome since June 2010, after a revised 0.3pc gain the previous month that was smaller than previously estimated, Commerce Department figures showed yesterday in Washington.
The IEA, which announced on June 23 that members would jointly tap strategic reserve for the third time in the organisation's history, will act again if needed, Nobuo Tanaka, the agency's executive director, said on June 25.
Previous releases responded to the first Persian Gulf War in 1991 and Hurricane Katrina in 2005.
New York futures dropped the most in six weeks on June 23, dipping below $90 a barrel for the first time since February.
The US will provide 30 million barrels of the release, European members will contribute about 20 million and Asian nations about 10 million barrels.
"The market dropped below $90 once again on fears about the economy and the Greek issues," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut."Just below $90 is pretty strong support, so it's trying to hold last week's lows."
Hedge funds cut bullish bets on oil to the lowest level in more than six months. The funds and other large speculators reduced wagers on rising prices by 14pc in the week ended June 21, according to the Commodity Futures Trading Commission's weekly Commitments of Traders report. Bullish bets have dropped 46pc from a March 8 record amid disappointing US economic reports on employment and housing. (Bloomberg)