Crude oil drops most in two weeks as US says bin Laden killed

Al Qaeda chief's elimination could be a bearish driver as it could alleviate contagion fears in the region
Crude oil drops most in two weeks as US says bin Laden killed
WORLD MARKET Futures fell as much as 1.6% after the first reports that bin Laden, who orchestrated the September 11 attacks, was dead (Getty Images)
By Bloomberg
Mon 02 May 2011 12:31 PM

Oil dropped the most in two weeks in New York on speculation that the killing of Osama bin Laden may ease the risk of Middle East supply disruptions.

Futures fell as much as 1.6 percent after the first reports that bin Laden, who orchestrated the September 11 attacks on New York and Washington, was dead. Obama confirmed the Al Qaeda leader died during a firefight in Abbottabad, Pakistan. Oil slipped earlier on signs China’s economic growth may moderate, tempering fuel demand in the world’s second biggest crude user.

“The elimination of someone like Osama could be a bearish driver because it could alleviate the contagion fears in the Middle East,” said Stephen Schork, president of market consultants The Schork Group Inc in Villanova, Pennsylvania. “The market has been waiting for news to move in a significant way in either direction. Now we have a headline that could clear the path for a significant correction lower.”

Crude for June delivery slipped as much as $1.82 to $112.11 a barrel in electronic trading on the New York Mercantile Exchange, and was at $112.39 at 3:05 pm Singapore time. The contract rose $1.07, or one percent, to $113.93 on April 29, the highest settlement since September 29, 2008.

Oil prices have climbed 23 percent 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.

Brent crude for June settlement slid $1.41, or 1.1 percent, to $124.48 a barrel on London’s ICE Futures Europe exchange. The contract advanced 7.3 percent in April.

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 US public, bin Laden was the face of terrorism. He appeared in videotapes threatening strikes against the West, including a message praising the September 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 US and Europe.

The terror group in February 2006 attacked the Abqaiq oil processing centre in Saudi Arabia, which handles two-thirds of the supply of the world’s biggest producer. Security guards there fought off the assailants who exploded two car bombs. There was no disruption to exports.

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 on Sunday. 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.

Stock markets are closed in China, Hong Kong, Malaysia and Singapore today for a holiday.

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.