Crude oil drops most in weeks
The death of Osama bin Laden may ease supply problems in the Middle East. With video on market reaction.
By Christian Schmollinger and Ayesha Daya, Bloomberg, May 2, 2011 6:02 AM ET
Oil dropped the most in almost seven weeks in London on speculation that the killing of Osama bin Laden may ease the risk of Middle East supply disruptions.
Brent crude futures fell as much as 3.4 percent, the most since March 15, following reports that bin Laden was dead. The al-Qaeda leader, who orchestrated the Sept. 11 attacks on New York and Washington in 2001, died in a firefight in Abbottabad, Pakistan, U.S. President Barack Obama said.
Post continues after video on market reaction to bin Laden's death:
Oil had slipped earlier on signs that cooling economic growth in China may temper fuel demand in the world’s biggest energy user.
“Good news on the geopolitical front has the potential to move prices back below $100,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. Bin Laden was a symbol of geopolitical uncertainty and terrorism whose death “carries hope of reduced threats of terrorism and political risk in northern Asia and the Middle East,” Spooner said.
Brent crude for June settlement slid as much as $4.22 to $121.67 a barrel, the lowest price since April 20, on London’s ICE Futures Europe exchange at 10:46 a.m. The contract advanced 7.3 percent in April. Oil for June delivery on the New York Mercantile Exchange was down $2.25 at $111.38 a barrel after declining as much as $3.11 to $110.82. The contract rose 6.8 percent in April to settle at $113.93 on April 29, the highest since Sept. 29, 2008.
Oil has climbed 29 percent in London and 22 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 Africa’s third- largest producer.
The Saudi-born bin Laden, who helped found al-Qaeda in 1988 after fighting Soviet troops in Afghanistan, was targeted in a compound in Pakistan. He was 54.
For the U.S. public, bin Laden was the face of terrorism. He appeared in videotapes threatening strikes against the West, including a message praising the Sept. 11 attacks as “divine blows” against America.
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.
Oil also slid after a Chinese manufacturing index declined more than forecast in April. The 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.
“Things are slowing down in the growth economies and that should also slow the consumption of crude,” Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today.
Asian oil demand growth will slow in the second half of this year as fuel prices hurt consumers, JPMorgan Chase & Co. said April 28.
Hedge funds and other traders raised their bullish bets on oil for a second week to the highest level since reaching a record in March.
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. That’s the most since the peak of 311,632 in the week of March 11.