Tags: Oil Slips in Volatile Trade After bin Laden Death

Oil Slips in Volatile Trade After bin Laden Death

Monday, 02 May 2011 03:05 PM

Crude oil dropped for the first time in four days after al-Qaeda leader Osama bin Laden was killed in Pakistan and a report showed U.S. manufacturing cooled in April.

Oil declined 0.4 percent after President Barack Obama said U.S. forces killed bin Laden yesterday. The Institute for Supply Management’s manufacturing index declined last month and a Chinese manufacturing measure dropped more than forecast.

“The market is taking some of the risk premium out of it,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “The manufacturing data came out and oil and gasoline have pulled back a little bit. Certainly the uptrend is slowing.”

Oil for June delivery fell 41 cents to settle at $113.52 a barrel on the New York Mercantile Exchange. The contract rose 6.8 percent last month and settled at $113.93 on April 29, the highest level since Sept. 22, 2008.

Gasoline futures for June delivery slipped 5.05 cents, or 1.5 percent, to $3.3479 a gallon on the Nymex.

Oil has climbed 32 percent in London and 24 percent in New York this year as revolts that overthrew the governments in Tunisia and Egypt raised concern that supplies from the Middle East would be disrupted as protests spread.

Fighting between rebels and forces loyal to Libyan leader Muammar Qaddafi has shut 1.3 million barrels a day of output in the country that was Africa’s third-largest producer.

Bullish Trend

“We’ve been straight up in this bullish trend, and we’re seeing some traders take off some of this length,” Bentz said.

The S&P 500 gained 0.35 point to 1,363.96 after rising to 1,370.58. The dollar fell 0.4 percent to $1.486 per euro. It touched $1.4902, the lowest level since Dec. 7, 2009.

Brent crude for June settlement slid 77 cents, or 0.6 percent, to $125.12 a barrel on London’s ICE Futures Europe Exchange.

The ISM’s manufacturing index declined to 60.4 last month from 61.2 in March, the Tempe, Arizona-based group said today. The April reading exceeded the 59.5 median forecast in a Bloomberg News survey.

China’s Purchasing Managers’ Index slipped to 52.9 from 53.4, the logistics federation and statistics bureau said yesterday. That was below the median forecast of 53.9 in a Bloomberg News survey of 20 economists.

The two countries are the world’s largest energy consumers. Slowing economic growth and manufacturing can cool fuel demand.

Attacks on Oil

Al-Qaeda and bin Laden encouraged attacks on oil production and distribution facilities as a way to damage the economies of the U.S. and Europe. In February 2006, Saudi Arabian security guards foiled the group’s attack on the Abqaiq oil-processing center in Saudi Arabia, preventing disruption to exports from the facility which handles two-thirds of the supply of the world’s biggest producer.

“Now we have to worry about who is going to be running the show as far as al-Qaeda is concerned and how it’s going to affect the markets,” said Richard Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago. “It’s probably going to increase oil’s volatility.”

Oil rose as much as 0.8 percent earlier amid concern that bin Laden’s death may spur retaliatory attacks and disrupt supplies.

“Though bin Laden is dead, al-Qaeda is not,” CIA Director Leon Panetta, who oversaw the overnight mission to kill bin Laden, said today in a statement sent to agency employees. “The terrorists almost certainly will attempt to avenge him, and we must, and will, remain vigilant and resolute.”

Retaliation Risk

“To the extent that bin Laden was a symbolic rallying point for the wider forces of terrorism, there may in fact be some increased risk of retaliation in the near future,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Hedge funds and other traders raised their bullish bets on oil for a second week to the highest level in three weeks. Net- long positions in oil increased by 11,202 futures and options combined, or 3.9 percent, to 301,118, in the week ended April 26, according to the Commodity Futures Trading Commission’s Commitments of Traders report. The level peaked at 311,632 in the week ended March 8.

Oil volume in electronic trading on the Nymex was 433,750 contracts as of 2:38 p.m. in New York. Volume totaled 366,674 contracts on April 29, 51 percent below the average of the past three months. Open interest was 1.61 million contracts.

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Crude oil dropped for the first time in four days after al-Qaeda leader Osama bin Laden was killed in Pakistan and a report showed U.S. manufacturing cooled in April.Oil declined 0.4 percent after President Barack Obama said U.S. forces killed bin Laden yesterday. The...
Oil Slips in Volatile Trade After bin Laden Death
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2011-05-02
Monday, 02 May 2011 03:05 PM
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