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Oil declined as the euro slumped to a two-year low, reducing investor appetite for raw materials, and on signals that the global economic recovery is faltering.
Futures dropped as much as 1.9 percent after the common currency depreciated to the lowest level since June 2010 against the dollar. World stock markets fell as South Korea lowered interest rates for the first time in more than three years and Australian payrolls were cut. The International Energy Agency forecast “muted” growth in oil demand in 2013.
The falling euro is the primary reason for oil’s drop today. A weaker currency is probably the only tool the Europeans can use in the short term to boost growth. The euro dropped as much as 0.6 percent to $1.2167 today, the lowest level since June 30, 2010. The Standard & Poor’s GSCI Index of 24 commodities decreased 0.9 percent. Nineteen of the raw materials on the index were lower.
Australian employers unexpectedly cut payrolls in June, and the jobless rate rose for a second month, to 5.2 percent from 5.1 percent, data from the statistics bureau in Sydney showed. South Korea reduced its benchmark seven-day repurchase rate by a quarter of a percentage point, highlighting concern that exports are threatened by Europe’s failure to resolve its debt crisis.
Oil consumption will increase by a “relatively muted” 1 million barrels a day, or 1.1 percent, to an average of 90.9 million in 2013, the Paris-based IEA said today in its first outlook for the coming year. Demand in emerging economies will surpass that of developed nations for the first time in 2013, the IEA forecasts.
The he August futures on U.S. light crude oil WTI (Light Sweet Crude Oil) on the NYMEX fell $ 0.62, and is now $ 85.19 a barrel.
August futures price for North Sea Brent crude oil mix fell 0.86$ to $ 99.80 a barrel on the ICE Futures Europe Exchange.
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