Oil trips on euro zone economic worry, politics
Euro zone business woes deepened at a faster pace than expected in April, with the Purchasing Managers Index for the bloc's dominant service sector falling to a five-month low, against forecasts that it rose.
Politics added uncertainty after the Socialist challenger edged out French President Nicolas Sarkozy, leaving the two to fight a May 6 election run-off, while the Dutch government was set to resign in a crisis over budget cuts.
The signs of economic and political turmoil sparked a "risk-off" trade, pushing global equities and the euro lower, shoving key industrial feedstock copper down more than 2 per cent and sending investors in the direction of perceived safe-haven assets such as the dollar and US Treasuries.
"The oil complex is off to a lower start ... due largely to a sharp drop in European equities that is emanating from weak manufacturing data out of Germany and France," Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.
"As a result, the euro has come off with a renewed risk-off environment prevailing across the global economic landscape," he added.
Brent June crude fell US$1 (RM3.07) to US$117.76 a barrel by 12:40 a.m. Malaysian time, having slipped to US$117.21 intraday and raising the possibility of a test of support at the 100-day moving average US$116.55.
Following the US May contract's expiration on Friday, US June crude fell US$1.59 to US$102.29 a barrel, having fallen below the 100-day moving average of US$102.02 to an intraday low of US$101.82.
That test of the moving average, the US June contract's debut in the front-month spot and another test of the Brent premium to its US counterpart <CL-LCO1=R> near $16 a barrel helped explain the larger price slip by the US crude contract.
"June's moving into the front month so it is testing support again around the 100-day moving average," said Chris Dillman, analyst at Tradition Energy.
Crude trading volumes remained light, assisting price movement, with Brent outpacing US volumes. That was no surprise as the market moved primarily on news from Europe, but turnover for both contracts stayed well below 30-day averages.
US gasoline futures managed a gain, with the front-month May contract still on the board until its April 30 expiration and after slumping 20 cents last week.
Oil markets continued to be buffeted by competing concerns about slowing economic growth and potential for supply disruptions after US and European sanctions on Iran aimed at curbing its nuclear program by limiting oil exports and revenues helped lift crude prices sharply in the first quarter.
The gloomy economic news from Europe arrived a day before a two-day US Federal Reserve policy meeting, with the central bank expected to steer clear of further bond purchases even after disappointing US jobs growth in March.
Iran's nuclear dispute
Iran's foreign minister said Tehran is optimistic that a next round of talks in Baghdad in May will make progress toward resolving the dispute with the West over the Iranian nuclear program.
But the success of sanctions curbing crude exports has forced Iran to deploy more than half its fleet of supertankers to store oil at anchorage in the Gulf, according to two Iran-based shipping sources.
China halved its Iranian crude imports and South Korea's imports fell 40 per cent in March compared with the year-earlier period, further signs of Iran's problems placing crude into Asia, traditionally its primary region for crude oil exports. — Reuters