NEW YORK: Crude oil fell about 2 percent on Friday, the first decline after three days of gains, as worries over the Greek fiscal crisis, weaker oil products prices and pre-weekend profit-taking undercut the market.
Gasoline and diesel’s proxy, heating oil, led the oil complex lower, sliding about 3 percent as concerns about their high refining margins over crude prompted those who had been bullish on such products to close out some positions.
A slowdown in the decline of US oil rigs did not help. Oil services firm Baker Hughes reported an overall drop of four US rigs this week, compared to 7 last week. It also cited new drilling activity in the Permian and Bakken shale basins, a sign that higher crude prices were coaxing producers back to the well pad after a six-month price rout.
Brent crude was down $1.50, or 2.4 percent, at $62.76 a barrel by 1:25 p.m. EDT (1725 GMT).
US crude fell $1.20, or 2 percent, to $59.25.
For the week, Brent was nearly 2 percent lower, while US crude slipped about 1 percent.
Traders pinned the decline mostly to fears about Greece as it teetered on the edge of default.
Euro zone leaders will hold an emergency summit on Monday to try and throw a lifeline to Athens. While the crisis has affected equity and treasury markets more than oil, the dollar’s resultant rise has made commodities denominated in the greenback costlier for users of currencies like the euro.
“Oil markets are not pricing much in terms of Greek risk but most of the European oil demand growth this year is coming from the southern countries,” said Olivier Jakob of Petromatrix in Zug, Switzerland.
Therefore, if there was a Greek default and a contagion of a risk premium to other southern European countries, it could have a negative impact on European oil demand.”
Profit-taking in oil products also weighed on crude, said Donald Morton, who runs an energy-trading desk at Herbert J. Sims & Co. in Fairfield, Connecticut. “The gasoline crack is still very high,” Morton said, referring to the profit margin refiners obtain for “cracking” the motor fuel out of crude.
“There is still a large speculator position in my opinion in gasoline.”
The gasoline crack stood at $27 a barrel on Friday, off from Wednesday’s 3-month high above $30. For heating oil, or diesel, the crack was above $19, a level broadly sustained since the end of May.
Demand for gasoline and other motor fuels has been strong across the northern hemisphere due to a peak in driving expected during the summer. But some market players doubt the strength of
motor fuel alone could keep oil prices at highs.
Meanwhile, US stocks were down in early afternoon trading on Friday, a day after a strong rally pushed the Nasdaq Composite index to a record high, but the major indexes were still on track for their strongest weekly performance in about two months.
The Nasdaq Composite broke its last standing milestone from the dot-com era on Thursday, while the S&P 500 rose to within 0.5 percent of its record high on the Fed’s perceived dovishness regarding the pace of a rate hike.
Wall Street was also affected on Friday by the “quadruple witching” day — the expiration of stock options, index options, index futures and single-stock futures — as traders close hedging positions or roll them over at the last minute.
At 12:36 p.m. ET (1636 GMT) the Dow Jones Industrial Average was down 49.31 points, or 0.27 percent, at 18,066.53, the S&P 500 was down 5.9 points, or 0.28 percent, at 2,115.34 and the Nasdaq Composite was down 14.37 points, or 0.28 percent, at 5,118.58.
Eight of the 10 major S&P 500 sectors were lower, with the energy index leading the declines with a 0.88 percent drop.
Apple’s 0.9 percent drop weighed the most on the S&P and the Nasdaq while Traveler’s 1.5 percent fall was the biggest drag on the Dow.