Oil slumps on growth concerns, corporate forecast cuts
NEW YORK |
NEW YORK (Reuters) - Oil fell sharply on Tuesday as commodity and equity prices were pressured by concerns about slowing global economic growth, Europe's continuing debt crisis, and weak forecasts from U.S. corporations reporting quarterly earnings.
Brent fell a sixth straight session and U.S. crude pulled back a fourth consecutive day as economic concerns and an improving crude oil supply picture continued to counter any potential lift from Middle East turmoil and Iran's dispute with Israel and the West over Tehran's nuclear program.
Chemical company DuPont (DD.N) lowered its earnings forecast, announced 1,500 job cuts and posted lower-than-expected profit, helping push equities, oil and other commodities lower.
The Thomson Reuters-Jefferies CRB index .TRJCRB, a gauge widely followed by commodity investors, fell 1.3 percent.
DuPont's gloomy outlook came a day after heavy machinery maker Caterpillar Inc (CAT.N) warned that the U.S. economy was slowing faster than expected.
Spain's borrowing costs rose after ratings agency Moody's downgraded five of the country's regions.
Business morale in France's manufacturing sector slumped in October to its lowest level in over two years as export demand from the euro zone weakened, adding to concerns about sputtering economic growth.
"The main bearish driver is the state of the economy," said Filip Petersson, an analyst at SEB in Stockholm. "And that's taken all markets down quite a bit."
TransCanada Corp's (TRP.TO) Monday restart of its Keystone pipeline carrying crude oil from Canada to the United States added pressure on oil futures.
Brent December crude fell $1.55 to $107.89 a barrel by 2:05 p.m. EDT (1805 GMT).
Brent fell to $107.31 during Tuesday's session, the lowest level since September 20 and below the 100-day moving average of $107.42.
U.S. December crude was down $2.43 at $86.22 a barrel, having fallen to $85.69, the lowest since mid-July.
Tuesday's move lower left U.S. crude poised "for a test on the 61.8 percent retracement of the $77.28 to $100.42 move at $86.12, and possibly below," Michael Fitzpatrick, editor-in-chief, wrote in the industry newsletter EnergyOverview.
U.S. November heating oil slumped more than 1 percent. It was down 3.54 cents at $3.0413 a gallon, having fallen during the session to $3.0193, below the 200-day moving average of $3.0278.
U.S. November RBOB gasoline retreated nearly 2 percent, and Tuesday's low trade of $2.5690 a gallon was the weakest for gasoline since June.
Oil prices also felt pressure from expectations that U.S. oil inventories likely rose last week as imports recovered, according to analysts polled by Reuters on Monday.
Crude inventories were expected to have risen 1.7 million barrels for the week ended October 19. <EIA/S>
The American Petroleum Institute will release its inventory report at 4:30 p.m. EDT (2030 GMT) Tuesday. The U.S. Energy Information Administration (EIA) will issue the government's report on Wednesday at 10:30 a.m. EDT (1430 GMT).
The slide in crude prices on Tuesday came even as the potential remains for Middle East turmoil to cause a disruption to the region's oil supply.
Iran said on Tuesday it would stop oil exports if pressure from Western sanctions got any tighter and that it had a "Plan B" contingency strategy to survive without oil revenues.
Major powers may ask Iran for stricter limits on its nuclear work if it wants an easing of harsh sanctions - a long-shot approach aimed at yielding a negotiated solution, according to Western diplomats.
Syrian rebels were attempting to seize an army base close to the main north-south highway. Rebels say capturing the base would help create a "safe zone" allowing them to focus on President Bashar al-Assad's southern strongholds.
Fears that Syria's conflict could envelope its neighbors and affect the key infrastructure and production in the region have been supportive to oil prices.
(Additional reporting by Peg Mackey in London and Manash Goswami in Singapore; Editing by Marguerita Choy, Alden Bentley and John Wallace)
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