The following is an excerpt from Mark Shenk and Moming Zhou | November 1, 2011 | Washpost.bloomberg.com |
Nov. 1 (Bloomberg) — Oil fell for a third day after Greek Prime Minister George Papandreou’s pledge to hold a referendum raised the prospect of the failure of Europe’s bailout plan.
Futures dropped as much as 4.3 percent after Greece’s decision to call a vote on its five-day-old bailout sent equities and the euro lower. Crude climbed 6.8 percent last week, the biggest gain since February, on the European package. China’s Purchasing Managers’ Index fell for the first time in three months in October, a report showed.
“The Greek debacle continues to be the main focus,” said Carl Larry, director of energy derivatives and research with Blue Ocean Brokerage LLC in New York. “You are seeing risk reduction across the board because of concerns about what will happen in Europe.”
Crude oil for December delivery declined $2.71, or 2.9 percent, to $90.48 a barrel at 12:48 p.m. on the New York Mercantile Exchange. Futures climbed 18 percent in October, the biggest gain since May 2009.
Brent oil for December settlement dropped $2.46, or 2.2 percent, to $107.10 a barrel on the London-based ICE Futures Europe exchange.
Papandreou’s referendum risks pushing Greece into default if voters reject the plan. An opinion poll published Oct. 29 showed most Greeks believe the accord on a new bailout package and a debt writedown is negative.
A rejection of the aid plan “would increase the risk of a forced and disorderly sovereign default” and raises the chance of Greece leaving the euro, Fitch Ratings said in a statement today.
The euro dropped as much as 1.8 percent to $1.3609, the lowest level since Oct. 12. A weaker euro and stronger dollar reduce the appeal of raw materials as an investment.
“The Greek action and the market reaction underscore the instability of the euro,” said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania. “The market got overenthusiastic over the agreement last week. The party’s over and now we have to deal with the hangover.”
Greece’s announcement came “out of the blue, it’s surprising, very risky,” Norbert Barthle, the ranking member of German Chancellor Angela Merkel’s Christian Democratic Union party on parliament’s budget committee, said in a telephone interview.
The Standard & Poor’s 500 Index fell 2.6 percent to 1,220.12, and the Dow Jones Industrial Average dropped 2.3 percent to 11,675.06.
U.S. regulators are investigating whether hundreds of millions of dollars are missing from client accounts at MF Global Holdings Ltd., according to two people with knowledge of the matter. The firm, which filed for bankruptcy protection yesterday, was ordered by the enforcement division of the Commodity Futures Trading Commission to preserve records for the review, one of the people said.
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