Oil dropped for a second day in New York on signs growth in the U.S. economy may slow, while traders prepared for further price swings on concern the death of Osama bin Laden will spark retaliatory attacks by terrorists.<\/p>\n
Crude, which touched a 2 1\/2-year high yesterday, fell as much as 1.4 percent after the Institute for Supply Management\u2019s manufacturing index declined to the lowest in four months. U.S. crude stockpiles rose last week from the highest since November, according to a Bloomberg News survey before an Energy Department report tomorrow. Oil options volatility increased after news of the al-Qaeda leader\u2019s death.<\/p>\n
\u201cU.S. oil demand is pretty soft as high prices are clearly having a dampening effect,\u201d said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. \u201cThere\u2019s no reason why the risk premium should decline lastingly on bin Laden\u2019s death. War in Libya and unrest in the Middle East has been more important than terrorism fears.\u201d<\/p>\n
Oil for June delivery dropped as much as $1.61 to $111.91 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $112.40 at 1:21 p.m. London time. Yesterday, it lost 0.4 percent to $113.52 after earlier reaching $114.83, the highest since September 2008. Futures have gained 30 percent in the past year.<\/p>\n
Brent crude for June settlement on the ICE Futures Europe Exchange in London fell as much as $2.24, or 1.8 percent, to $122.88 a barrel. Yesterday, it dropped 0.6 percent to $125.12.<\/p>\n
Price Swings<\/p>\n
Oil in New York yesterday declined as much as 2.7 percent, the most in two weeks, after bin Laden was killed in Pakistan, before rebounding 0.8 percent. Implied volatility for at-the- money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 28 percent today, up from 26.2 percent April 29.<\/p>\n
\u201cFollowing the initial emotional response to bin Laden\u2019s death, markets soon snapped back to reality,\u201d economists at Australia & New Zealand Banking Group Ltd. led by Warren Hogan wrote in a note today. \u201cThere are now concerns that retaliatory attacks could occur, and this has seen oil prices recoup most of their early losses.\u201d<\/p>\n
Bin Laden encouraged attacks on oil facilities as a way to damage the U.S. and European economies. Crude infrastructure in Saudi Arabia, holder of the world\u2019s largest reserves, was targeted by al-Qaeda from 2002 as it sought to bring down the ruling al-Saud family. Saudi Arabian forces foiled the biggest attempted attack in 2006 on the Abqaiq oil-processing center, which handles two-thirds of the kingdom\u2019s supply.<\/p>\n
Rising Streak<\/p>\n
Crude has advanced this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Algeria, Bahrain, Iran, Oman, Syria and Yemen. Oil in New York has increased for eight months, the longest rising streak on record.<\/p>\n
Brent, the European benchmark, traded at a premium of $11.51 a barrel to U.S. futures. The difference between front- month contracts in London and New York surged to a record $19.54 on Feb. 21. The spread averaged 76 cents last year.<\/p>\n
An Energy Department report tomorrow may show crude stockpiles climbed 3 million barrels from 363.1 million last week, according to the median estimate from seven analysts surveyed by Bloomberg News.<\/p>\n
The ISM\u2019s manufacturing index declined to 60.4 last month from 61.2 in March, the Tempe, Arizona-based group said yesterday. That\u2019s the lowest reading this year.<\/p>\n
Credit Suisse cut its estimate of China\u2019s economic growth for this year and 2012 after the nation\u2019s Purchasing Managers\u2019 Index slipped to 52.9, below the median forecast of 53.9 in a Bloomberg News survey of 20 economists. The country is the world\u2019s second-largest crude consumer, after the U.S.<\/p>\n<\/div>\n
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