West Texas Intermediate futures were little changed, after losing as much as 1 percent. German Finance Minister Wolfgang Schaeuble said on France’s Europe 1 radio that “in 12 to 24 months we’ll see a calming of financial markets,” sending the euro to a four-month low against the dollar. Enbridge Inc. (ENB) and Enterprise Products Partners LP (EPD) reversed the Seaway pipeline to alleviate a glut in the U.S. Midwest. In China, home prices fell in a record number of cities last month and car dealers posted inventory levels that foreshadowed deeper price cuts.

“The market is facing strong headwinds from the stronger dollar and continuing concerns about the euro zone, such as a Greek exit, possible contagion, economic weakness and the possibility of further downgrades,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Still, the underlying physical market is tighter than the price declines suggest.”

Crude for June delivery was at $92.40 a barrel, down 16 cents, in electronic trading on the New York Mercantile Exchange at 1:48 p.m. London time after falling as low as $91.60. The contract yesterday slipped 25 cents to $92.56, the lowest close since Nov. 2. Prices are 3.9 percent lower this week and down 6.5 percent this year.

Brent oil for July settlement dropped 28 cents, or 0.3 percent, to $107.21 a barrel on the London-based ICE Futures Europe exchange after falling to $106.40, the lowest intraday level this year. The premium of the European benchmark to WTI for the same month was at $14.46. Earlier it narrowed to $13.62 a barrel, the least in two weeks, after the Seaway pipeline reversal allowed oil to be diverted from its delivery point in Cushing, Oklahoma, to the Gulf Coast.

Technical Support

Brent may drop to $99 a barrel, in line with low points reached in August and September, after breaking through support provided by a long-term trend-line, according to Stephanie Aymes, a technical analyst at Societe Generale SA in London.

Prices of new homes in China fell from a year earlier in 46 of the 70 cities tracked by the National Bureau of Statistics, the agency said today. Dealerships for Honda Motor Co., Chery Automobile Co., BYD Co. and Geely Automobile Holdings Ltd. (175) had more than 45 days of inventory at the end of last month, according to an official from the government-backed China Automobile Dealers Association.

Euro Breakup Scenario

Greece’s credit rating was downgraded one level by Fitch Ratings on concern that the country won’t be able to muster the political support needed to sustain its membership in the euro area. Nine Spanish lenders were cut three notches and seven were kept on review for further reductions, Moody’s Investors Service said yesterday in a statement, citing a recession and mounting loan losses.

A “disorderly” breakup of the euro region could send Brent as low as $60 a barrel, “due to the resulting sharp European recession and negative global economic consequences,” according to Bank of America Corp. The price may rebound to $120 if Greece successfully renegotiates its bailout package, the bank said in a report dated yesterday.

The Federal Reserve Bank of Philadelphia’s general economic index slid to minus 5.8 this month, the lowest reading since September, from 8.5 in the previous month. The decline was the first in eight months. Economists forecast the gauge would rise to 10, according to a Bloomberg News survey.

Supply Buildup

Brent’s premium to WTI narrowed as the reversal of the 500- mile (880-kilometer) Seaway pipeline was completed. Enbridge and Enterprise said yesterday they plan to start moving oil from Cushing, Oklahoma, to Houston-area refineries this weekend.

The startup may ease a glut at Cushing, the delivery point for WTI, where inventories rose 1 million barrels last week to a record 45.1 million, according to Energy Department data. The line will initially be able to deliver 150,000 barrels per day, increasing to more than 400,000 in the first quarter of 2013, the companies said.

New York oil is still poised to decline next week as the reversal of Seaway may not be enough to alleviate the buildup of supplies in the central U.S., according to a Bloomberg News survey. Nineteen of 34 analysts, or 56 percent, forecast prices will drop through May 25. Nine respondents predicted futures will rise and six estimated they will be little changed.

“The commentary out there still suggests we’ve got a bearish tone,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “Everyone is still concerned about what’s happening in Europe and that adds to the demand destruction. It’s still mixed data from the U.S., there’s nothing clean coming out.”

Bloomberg

Rising oil stocks in the United States, and increased production from Saudi Arabia have also helped push oil down from levels near $126 per barrel in April.

“The weakness in oil was the result of higher Saudi production and concerns for the U.S. economy and a slow-down in China,” said Christopher Bellew at Jefferies Bache.

London Brent crude was down 77 cents to $111.96 a barrel, dropping for a sixth straight session, its longest losing streak since the middle of 2010.

U.S. light, sweet crude was last at $95.62, down $1.39.

This week’s fall has been largely caused by renewed uncertainty about the future of the euro zone.

In Greece, a highly fractured parliament struggled to cobble together a coalition, with the Leftist candidate for prime minister opposing a bailout deal crucial to the economy.

This stoked fears about whether the euro zone would be able to pull itself out of a debt crisis, weighing on equities and commodities across the board.

Leadership changes in France and Greece fanned worries that the political uncertainty could threaten austerity plans seen by some as key to tackling the euro zone debt crisis.

However, while data from major global economies has been disappointing recently, Bellew highlighted data from Germany on Wednesday showing exports and imports both rose to record monthly levels in March.

“It seems to me as if Brent will hold above $110 per barrel, and maybe rally to the $116 area if the speculators come back into the market.”

“The market became overly bearish very quickly and the momentum was a result of what happened in Europe,” said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm.

“People are becoming too pessimistic about how they are going to resolve it and this sentiment will continue to be bearish for commodities.”

US Crude Stocks Up

Higher OPEC production and rising crude stockpiles globally also weighed on oil prices.

Investors are now eyeing U.S. government data due later on Wednesday to confirm industry statistics that showed a larger-than-expected rise in crude inventories, already at their highest level since 1990.

In the United States, the world’s largest oil consumer, domestic crude stocks jumped 7.8 million barrels in the week to May 4, according to industry group the American Petroleum Institute. This is nearly four times the forecast in a Reuters poll of analysts.

Saudi Oil Minister Ali al-Naimi reiterated on Wednesday that there was a surplus of oil in the market, following his earlier comments that the world’s top exporter is pumping around 10 million barrels per day and is storing 80 million barrels to meet any sudden disruption in supplies.

“In light of the current economic environment, it appears that the Kingdom is still concerned that high oil prices will eat into demand and could dampen any economic recovery,” JBC Energy said in a note to clients.

Higher production from Saudi Arabia has partly filled a supply gap caused by lower imports from sanctions-hit Iran. India has joined other Iranian crude buyers in Asia to cut back imports from the Islamic Republic.

CNBC

Gas for day-ahead delivery was up 0.65 pence from morning trading levels seen on Thursday at 59.00 pence per therm, while within-day gas added 0.20 pence to 59.70 pence.

‘Langeled and BBL flows are lower and the system is short,’ one UK gas trader at a utility said on Friday morning, before the market balance turned positive.

Gas flows from Norway via the Langeled pipeline fell by around a quarter to 40 million cubic metres per day (mcm/d) on Friday morning, while imports from the Netherlands through the BBL pipeline halved early in the day but had regained slightly since, National Grid data showed.

The market opened undersupplied but balanced out later in the morning, the same data showed.

Supply from Britain’s South Hook liquefied natural gas (LNG) terminal was steady on Friday following the delivery of one more cargo to the facility late on Thursday.

Gas flows from Shell’s Bacton terminal were expected to drop by 16.8 mcm/d for four hours on Saturday, which added pressure to the weekend price.

The contract rose 0.90 pence to 58.60 pence in Friday trading.

Short term weather forecasts showed continuously unsettled conditions marked by strong winds, while temperatures are expected to climb over the 6-15-day period, Britain’s Met Office said.

Trading across the curve was thin, but benchmark front-season prices rose, tracking movements on the prompt.

The contract, which rose 0.25 pence to 69.75 pence, defied bearish trading in the oil market, where Spain’s sovereign credit rating downgrade weighed on investor confidence.

British power prices for Monday eased to 43.50 pounds per megawatt-hour, reflecting wide supply margins.

London South East

Futures slipped as much as 0.6 percent after New York-based Standard & Poor’s reduced Spain’s rating to BBB+ from A and said the nation may have to provide fiscal support to the banking sector as the economy contracts. Prices also dropped after reaching technical resistance. West Texas Intermediate crude may decline next week after economic confidence in the euro-region fell and more Americans than forecast filed applications for unemployment benefits, a Bloomberg News survey showed.

“It’s quite clear in West Texas terms that we’ve moved back into the trading range between $103.50 and $108.50, and at this stage we’re not looking at any factors over the next few weeks that are likely to drive us out of there,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “Europe is an important economy to the globe but we don’t see it as a major engine of growth.”

Crude for June delivery slid as much as 62 cents to $103.93 a barrel in electronic trading on the New York Mercantile Exchange. It was at $103.96 at 2:25 p.m. Singapore time. The contract rose 43 cents yesterday to $104.55, the highest close since April 2. Prices are up 0.9 percent this week and 5.2 percent higher this year.

Brent oil for June settlement on the London-based ICE Futures Europe exchange declined 65 cents, or 0.5 percent, to $119.27 a barrel. The European benchmark contract’s premium to West Texas futures increased for a third day to $15.45, from $15.37 yesterday.

Chart Resistance

Oil in New York has technical resistance along its 50-day moving average, according to data compiled by Bloomberg. Futures halted yesterday’s advance near this indicator, which is at $105.10 a barrel today. Sell orders tend to be clustered near chart-resistance levels.

Prices may decrease next week on lower euro-region confidence and the unemployment report yesterday, a Bloomberg survey showed. Sixteen of 37 analysts and traders surveyed forecast oil will drop through May 4. Twelve respondents predicted futures will rise and nine estimated there will be little change.

Economic Outlook

U.S. jobless claims fell to 388,000 last week from a revised 389,000 the prior week, the highest since early January, according to Labor Department data yesterday. An index of executive and consumer sentiment in the 17-nation euro area slid to 92.8 from a revised 94.5 in March, a report by the European Commission in Brussels showed.

The countries using the euro accounted for about 12 percent of global oil demand in 2010, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. was the biggest crude user, responsible for 21 percent of world consumption.

Libya plans to surpass its pre-rebellion crude output by about June and will soon start its largest refinery that was damaged during fighting last year, Nuri Berruien, chairman of state-run National Oil Corp. said yesterday. Production is expected to climb above 1.6 million barrels a day, he said.

Bloomberg

Futures were little changed in New York after gaining 0.6 percent yesterday. Economic growth is expected to “remain moderate over coming quarters and then to pick up gradually,” the Federal Open Market Committee said in a statement. Prices declined earlier after U.S. supplies gained more than forecast and Iran’s envoy in Moscow said his country may halt the expansion of its atomic program to avert new Western sanctions.

“The FOMC moderately upgraded their growth estimates which reinforced the general view the market is operating on, that you will see a solid demand outlook from the U.S.,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. The reaction to the Iran report “reflects the fact that traders and investors putting their money on the line want to see far more compelling evidence that it was actually happening,” he said.

Crude for June delivery was at $104.11 a barrel, down 1 cent, in electronic trading on the New York Mercantile Exchange at 3:06 p.m. Singapore time. The contract yesterday rose 57 cents to $104.12, the highest close since April 17. Front-month futures have climbed for four days, the longest winning streak in two months. Prices are 5.3 percent higher this year.

Brent oil for June settlement was at $118.87 a barrel, down 25 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s front month premium to West Texas Intermediate was at $14.76, from $15 yesterday.

Technical Resistance

Oil’s gain in New York is stalling as futures approach technical resistance along the top of a downtrend channel going back about two months, according to data compiled by Bloomberg. This level is around $104.23 a barrel today. Sell orders tend to be clustered near chart-resistance levels.

Prices will stay above $100 a barrel even as economic growth slows, according to Mirae Asset Securities Ltd.

“While we still expect oil prices to soften, we don’t see a collapse scenario,” Gordon Kwan, head of regional energy research at Mirae Asset in Hong Kong, said in a report e-mailed today. “Mirae continues to believe that the $100 a barrel oil price is here to stay.”

Crude has climbed this year amid speculation that tension with Iran over its nuclear program may disrupt Middle East supplies. The Islamic Republic is considering a Russian proposal to stop building centrifuges, or machines used to enrich uranium, and mothball ones that haven’t been put into use yet, Iranian Ambassador Mahmoud-Reza Sajjadi said in Moscow yesterday.

Japan Crude Imports

Efforts to resolve the dispute will be complicated if the European Union goes ahead with an embargo on the nation’s petroleum exports from July 1, Sajjadi said.

Separately, Japan said its crude imports from Iran fell 6.3 percent in March from a year ago. Purchases were 1.8 million kiloliters, compared with 1.9 million kiloliters in March 2011, according to data today from the Ministry of Finance. Imports climbed from 1.2 million kiloliters in February.

U.S. crude inventories rose 3.98 million barrels to 373 million last week as output climbed to a 12-year high, according to the Energy Department. They were projected to increase 2.8 million barrels, according to the median of 11 analyst estimates in a Bloomberg survey.

Stockpiles of gasoline decreased 2.2 million barrels, Energy Department data showed. They were forecast to fall 1.5 million barrels, the survey shows. Distillate supplies, a category that includes heating oil and diesel, dropped 3.1 million compared with an estimated 500,000 barrel gain.

Gasoline slid for the eighth time in nine days after the report showed deliveries to wholesalers dropped 3.2 percent to a five-week low. Prices for May delivery fell 0.36 cent to $3.1557 a gallon on the New York Mercantile Exchange yesterday.

Bloomberg

May gas prices rose 0.25 pence to 58.35 pence per therm on Friday as Britain’s Met Office forecast temperatures to fall slightly below seasonal norms over the coming 6-15 days, lifting the potential for higher gas demand.

“Spot pricing is firm on May 2012 strength, with continued forecasts of a cold May ahead,” one UK gas trader at a utility said.

Day-ahead gas reflected gains on the May contract and added 0.10 pence to 59.85 pence, while within-day gas traded at 60.40 pence, up 0.15 pence.

The gas system opened undersupplied on Friday as withdrawals from storage facilities stopped because prompt prices were not high enough to make a profit on flowing gas stored at lower summer prices, traders said.

Withdrawals from Britain’s largest storage facility, Rough, fell from 30 million cubic metres per day (mcm/d) overnight to just 10 mcm/d on Friday morning, while flows from the Aldbrough site dropped to zero at the start of the gas day at 0500 GMT, National Grid data showed.

Gas demand remained subdued at 253.5 mcm/d, 10 percent below seasonal norms.

The outlook for liquefied natural gas (LNG) supply, which Britain is increasingly dependent on, was also healthy with five more vessels expected to deliver the fuel unitl May 4.

In France, LNG terminal strike action forced the diversion of Qatari delivery, which is expected to arrive in Spain on Saturday instead, AIS data showed.

Talks between French trade union CGT and terminal operator GDF Suez continued on Friday to discuss workers’ demands for higher bonuses.

Further out, benchmark front-season prices rebounded from a fresh two-month low reached on Thursday as firmer oil prices led bullish trading activity.

Winter 2012 gas prices traded up 0.15 pence at 69.90 pence per therm.

British day-ahead power prices defied movements in the gas market and fell day on day as mild weather forecasts for early next week were expected to weigh on demand.

Spot baseload power fell 15 pence to 45.35 pounds per megawatt-hour (MWh).

Reuters

China’s economy grew 8.1 percent in the first quarter from 8.9 percent in the previous quarter, weaker than expected and the slowest growth in nearly three years, raising fears that the downward drift will extend into the second quarter and dampen oil demand.

A stronger dollar and a jump in the cost of insuring Spanish debt against default to a record high on Friday renewed worries about the eurozone debt crisis, pressuring oil prices further.

Front-month Brent crude slipped 1.17 to $120.04 a barrel by 0311 GMT, after settling at $121.21 a barrel on Friday. U.S. oil slipped 64 cents to $102.20 a barrel after settling at $102.83.

“The weaker than expected Chinese data appears to be the key driver of the market right now,” said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investment.

China’s implied oil demand rose moderately in March over a year earlier, but stood at a five-month low on a daily basis, as refineries scaled back runs to the lowest level since October on maintenance and poor refining margins.

Investors were also worried after a survey in the U.S. showed consumer sentiment had slipped in early April as higher gasoline prices hit household budgets.

The U.S. dollar index rose 0.26 percent on Monday. A stronger dollar makes the commodity more expensive for consumers using other currencies.

Oil prices were also under pressure after top oil exporter Saudi Arabia’s Oil Minister Ali al-Naimi said on Friday that the country is determined to bring down high oil prices and is working with fellow OPEC members to accomplish that.

Naimi reiterated that there were no supply shortages in the global oil market and the kingdom stood ready to use its spare production capacity if necessary.

Iran Worries

Concerns that further western sanctions could disrupt more Iranian oil exports offset worries on the global economy.

“The market is looking at the Middle East as well, especially on Iran’s nuclear weapons program, as the issue needs to be resolved as soon as possible ahead of the U.S. elections,” said Emori.

U.S. President Barack Obama said there would be more sanctions imposed on Iran if there is no breakthrough in nuclear talks with global powers in the coming months, responding to Israeli accusations that Tehran has been given a “freebie.”

At a news conference in Cartagena, Colombia, where he was attending the Summit of the Americas, Obama said negotiations between Iran and six world powers that resumed on Saturday would not stretch on indefinitely and would require Iran to act.

The potential for supply disruption and tightening sanctions have helped push crude prices higher in 2012. The European Union’s ban on importing Iranian oil set to start in July has already curbed Tehran’s exports.

CNBC

Total is considering various options to tackle the gas leak at the field, which could include taking six months to drill a relief well.

The Elgin gas field sends its gas into the UK through the Shearwater Elgin Area Line (the SEAL line) into the Bacton SEAL beach gas terminal operated by Shell on the coast of Norfolk.

Gas from Shell’s Shearwater field also flows through the SEAL line.

Flow data from system operator National Grid shows that across the current winter (from October 1 to date) the average flow rate into the UK’s Bacton Seal terminal, including these two fields, was 15 million cu m/day.

Shearwater has brought forward planned maintenance to coincide with the problems at Elgin.

UK gas demand varies from around 200 million cu m/day in summer to around 400 million cu m/day in winter.

A prolonged loss of 15 million cu m/day throughout summer should not be a serious problem for the UK gas market, since the system is built to cope with much higher winter demands.

The UK gas market is also well ahead on its injections into storage this year. Traders have taken advantage of low spot prices to start their summer injections in early March, whereas normally they would start in April. This means that there will be reduced injection demand later in summer.

The UK’s main storage, Rough, now holds more than 1 billion cubic meters more gas this year than at the same time last year.

If a relief well is needed at Elgin, taking as long as six months, it could stretch into next winter.

If SEAL flows remained reduced into winter, when demand starts picking up again around October, that would be more difficult for the market.

However, a loss of 15 million cu m/day could be compensated for, even on high-demand days.

The UK, for example, has extensive regasification capability at its LNG terminals such as South Hook, Dragon and Isle of Grain, which has been used far below full capacity rates during the current winter. Dragon LNG in particular has barely been used this winter.

If the UK suffered reduced North Sea flows next winter, it could step up LNG imports to compensate, or imports from Europe through the Belgian Interconnector. The Interconnector was exporting from the UK much of the current winter.

Turning to imports, however, would require the UK to compete with other importers, including in the case of LNG with Japan, which could lead to higher prices.

Platts

The so-called carbon price support was set at 9.55 pounds ($15.13) a metric ton for 2014, according to a budget document posted today on the U.K. Treasury’s website. That compares with 4.94 pounds from April 2013, when the policy takes effect.

U.K. power producers burning fossil fuels like gas and coal will have to pay the government surcharge, which is calculated two years in advance, in addition to buying European Union permits to cover emissions. There is a risk utilities will end up paying more for emissions should EU allowances rise, according to PricewaterhouseCoopers LLP.

“Setting the tax rate two years in advance relative to a volatile commodity is fraught with challenges,” Jonathan Grant, director at PricewaterhouseCoopers’s sustainability and climate change unit in London, said today by e-mail.

Britain is seeking to cut carbon emissions by 34 percent by 2020. RWE AG (RWE), Europe’s biggest carbon emitter, and Drax Group Plc (DRX), owner of the largest power station in western Europe, say the levy makes it hard for them to sell power forward.

EU allowances for 2014 plunged 56 percent in the last year and were at 8.61 euros a ton as of 4:50 p.m. on London’s ICE Futures Europe exchange. The price averaged 14.39 euros in the year to the end of February.

The price support is intended to bridge the gap between EU permit prices and the U.K.’s carbon floor, which has been set through 2020 and determines the minimum level industries will pay to emit. The carbon floor starts at 16 pounds a ton in 2013, rising to 30 pounds by 2020.

The U.K. Treasury calculates the carbon support two years in advance. The 2014 support will be based on the average price of EU allowance futures for that year in the twelve months to February 2012, according to documents posted previously on the Treasury’s website. The measure will raise 1.7 billion pounds in its first two years, today’s documents show.

Bloomberg

According to National Grid’s transmission entry capacity (TEC) register, published on Monday, 12 power plants have notified the system operator of an intention to cut TEC from 1 April next year.

TEC defines a generator’s maximum allowed export capacity onto the UK electricity transmission system. It can be traded bilaterally between parties.

The loss of effective generation capacity includes 445MW at RWE npower’s 1.4GW Littlebrook oil-fired plant and the outright closure of the 218MW Derwent gas-fired power plant, owned by SSE, International Power and Mitsui.

A large chunk of the capacity loss – 1,966MW – will come from E.ON’s Kingsnorth coal-fired power plant, which last month became the first power station in the UK to declare its closing date under the EU large combustion plant directive

Of the 12 plants, six are gas-fired, reflecting the intense pressure on gas-fired power generation economics amid cripplingly low forward spark and clean spark spreads – a measure of profit margins for gas-fired generators.

Debate

The Summer ’13 clean spark spread has fallen from £6.94/MWh in December 2010 – its highest level since ICIS began calculating the product’s value – to £4.23/MWh at Monday’s close.

A recovery over the last two months, which has seen the derivative contract rise from just £3.24/MWh in mid-February, has not encouraged gas-fired generators back into the market.

Centrica previously said it was reconfiguring its gas-fired plants at Peterborough, Brigg and Roosecote, with a combined capacity of 909MW, to operate in the short-term operating reserve market as open-cycle gas turbines (OCGTs).

Capacity at its Barry gas-fired plant will also be cut by 103MW, to 142MW from 245MW on 1 April 2013, as it too is reconfigured to sell into the more-profitable peaks market.

The growing loss of generation capacity has been the subject of debate among power traders in recent weeks. “The market is not pricing in the potential reduction in supply,” one trader said.

Only last week, traders in France and the Netherlands insisted that participants in markets linked to the UK had not adequately priced potential power exports via the French and Netherlands interconnectors into continental power contracts.

ICISHeren