Oil Tumbles From 8-Month High as Consumer Confidence Slumps

Crude oil tumbled from an eight- month high and gasoline fell as U.S. consumer confidence declined in June, indicating lower fuel demand.

Oil dropped 2.2 percent after the Conference Board’s sentiment index unexpectedly weakened and delinquencies on the least risky U.S. mortgages more than doubled. The U.K. economy shrank the most since 1958, a government report showed. Oil also retreated on forecasts that U.S. fuel supplies rose last week.

“The consumer confidence number is raining on the bulls’ parade,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “We were moving higher earlier today but concerns about the economy are now pulling the market lower.”

Crude oil for August delivery fell $1.60 to settle at $69.89 a barrel at 2:53 p.m. on the New York Mercantile Exchange. Prices are up 57 percent this year. Futures touched $73.38 a barrel earlier today, the highest since Oct. 21, as militant attacks curbed supply from Africa’s largest producer.

Prices pared losses in electronic trading after the American Petroleum Institute reported that U.S. crude-oil supplies dropped 6.82 million barrels to 349.7 million last week, the biggest decline since September. Futures were down 92 cents, or 1.3 percent, at $70.57 a barrel at 4:46 p.m.

Oil in New York posted a 41 percent quarterly gain, the biggest since 1990. Prices have rallied as rebounding world equity markets and a weaker dollar encouraged investors to buy the commodity as an alternative investment.

‘Significant Volatility’

“I’m expecting significant volatility this week as fund managers position themselves for the end of the quarter and because it’s a short trading week,” said Stephen Schork, president of the Schork Group Inc. of Villanova, Pennsylvania. “I don’t think this is the death-knell of the market.”

There will be no floor trading in New York on July 3 because of the Independence Day holiday.

“Once we come back from the holiday on Monday, it will be a whole new game,” Schork said. “Price is high and demand is low. Attention may shift to the fundamentals.”

Gasoline for July delivery declined 3.86 cents, or 2 percent, to end the session at $1.8972 a gallon in New York. The July contract expired today. The more-active August contract declined 3.34 cents, or 1.7 percent, to settle at $1.902.

The Conference Board’s consumer sentiment index fell to 49.3 from a revised 54.8 in May, the New York-based research group said. Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today.

U.K. Economy

Gross domestic product in the U.K. decreased 2.4 percent in the first quarter from the final three months of 2008, the Office for National Statistics said today in London. The economy was forecast to slip 2.1 percent, according to the median of 28 economists surveyed by Bloomberg News.

“Oil moved above $73 overnight, but then had to face some sobering headlines,” said John Kilduff, senior vice president of energy at MF Global in New York. “The U.K. GDP numbers were quite dour, which took the momentum right out of the market.”

An Energy Department report tomorrow will probably show that U.S. fuel inventories rose last week. Gasoline supplies climbed 2 million barrels, according to the median of 15 estimates in a Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, increased 1.5 million barrels.

Crude-oil supplies declined 2 million barrels, according to the survey. The Energy Department is scheduled to release its weekly report on July 1 at 10:30 a.m. in Washington. The industry-funded API released its weekly supply data at 4:40 p.m. today, 10 minutes later than usual.

Possible Outcomes

“Just about any possible outcome tomorrow will be bearish,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “We are expecting the fuel stocks to increase and there will be plenty of crude oil available even if there is a drop.”

Total U.S. daily fuel demand in the four weeks ended June 19 was down 6.6 percent from a year earlier, the Energy Department said last week.

The International Energy Agency, an adviser to 28 developed nations, yesterday lowered its five-year forecast for global crude demand because of the economic slump. The Paris-based agency cut its oil-consumption estimates for every year through 2013 by about 3 million barrels a day.

Declining crude oil and gasoline prices helped send the Reuters/Jefferies CRB Index of 19 raw materials lower. The index dropped 1.7 percent to 249.96. The measure is up 13 percent for the quarter.

Brent Oil

Brent crude oil for August settlement fell $1.69, or 2.4 percent, to end the session at $69.30 a barrel on London’s ICE Futures Europe exchange.

Crude oil volume in electronic trading on the Nymex was 456,723 contracts as of 3:06 p.m. in New York. Volume totaled 371,435 contracts yesterday, 25 percent less than the average over the past three months. Open interest was 1.15 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

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