Oil headed for the biggest monthly drop in more than three years in New York on speculation that slowing U.S. economic growth and Europe’s debt crisis will reduce fuel demand.
Futures fell as much as much as 2.2 percent after more Americans applied for jobless benefits and the nation’s gross domestic product grew more slowly than estimated. Fitch Ratings downgraded eight Spanish regions’ credit, stoking concern the crisis will force lenders to bail out of Spain. A government report showed U.S. crude supplies rose to a 22-year high.
“The markets are clearly being driven by economic fear,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “The data here show that economic growth is slowing and the situation in Europe continues to worsen. The economic headwinds are very strong.”
Crude oil for July delivery declined $1.70, or 1.9 percent, to $86.12 a barrel at 11:56 a.m. on the New York Mercantile Exchange. Prices touched $85.86, the lowest intraday price since Oct. 20. Oil traded at $86.63 a barrel before release of the inventory report at 11 a.m.
New York crude is down 18 percent this month, the biggest drop since December 2008, and is 13 percent lower this year.
Brent oil for July settlement decreased $2.02, or 2 percent, to $101.45 a barrel on the London-based ICE Futures Europe exchange. Prices have dropped 15 percent this month, the most since December 2008.
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