NEW YORK (Reuters) - Gasoline futures tumbled nearly 5 percent on Monday, dragging crude down $2 and extending oil’s slump this month to more than 15 percent as concern mounted about energy demand and the economy.
U.S. wholesale gasoline prices fell 4.7 percent to close below $3 a gallon for the first time since March. The sell-off came on signs of weakening demand in the world’s largest oil consumer, and after the U.S. Army Corps of Engineers opened a spillway along the Mississippi River at the weekend, making it less likely floods will hit U.S. refinery operations.
The heavy midday sell-off in gasoline turned back a brief rally spurred by the euro’s rise off of a seven-week low against the dollar as a European Union meeting showed support for debt-burdened countries. <FRX/>
“It’s notable that RBOB (gasoline) which led the complex up is now leading it down,” said John Kilduff, a hedge fund manager at Again Capital LLC in New York, adding there was a sense of “declining economic activity and a negative impact on demand outlook.”
U.S. data showed manufacturing growth in New York State slowed much more than expected in May, while U.S. homebuilders struggled to find buyers.
U.S. crude futures for June delivery settled down $2.28 at $97.37 a barrel, and slid further in electronic trading as low as $96.89 by 5:00 pm EDT (2100 GMT). Prices are almost $18 below the post-2008 high of $114.83 hit on May 2.
June Brent, which expires on Monday, hit a session low of $112.00 and finished down $1.10 at $112.73. The July contract was down $3.03 at $110.25 a barrel. Prices are down by about $16 since the start of the month.
RBOB gasoline futures settled down 4.66 percent at $2.9311 a gallon and hit a low of $2.9183 in after-hours electronic trading. Gasoline futures have fallen by 16 percent or around 55 cents since late April.
Oil traders were nervous about mounting volatility. Prices have whipsawed since the 10 percent price crash on May 5, and they traded in a large $11 range last week.
Crude trading volumes slowed from the high levels seen during the volatile trade in May. Brent trade volumes were 14 percent below the 30-day average by 5:00 p.m. EDT, with U.S. futures volume down 11 percent. RBOB trading volumes bucked the trend, rising 20 percent above the 30-day average.
On Friday, U.S. Commodity Futures Trading Commission data showed hedge funds and other large financial investors had been substantially cutting bets on higher oil prices, while some had been increasing bets that prices were set to fall. However the funds are still holding near record net length. <CFTC/>
Analyst Timothy Evans at Citi Futures Perspective in New York said gasoline came under pressure when the U.S. Army Corps of Engineers opened the Morganza spillway to relieve flooding.
“Speculators who had loaded up long positions in gasoline in recent weeks, in part on the idea that flooding would cut supplies, are running for the exits now,” Evans said.
“Worries that high retail gasoline prices were crimping demand are also weighing on gasoline, particularly after the Department of Energy data showed the lowest weekly gasoline offtake since February, with the four-week average off 2.4 percent from a year ago.”
The euro touched its lowest since March before recovering after German Chancellor Angela Merkel said it would be “incredibly damaging” for the euro zone’s credibility if Greece restructured its debt payments.
Euro zone finance ministers met to discuss the debt crisis. Sexual assault charges against International Monetary Fund chief Dominique Strauss-Kahn in New York over the weekend raised fears a new head could be tougher on heavily indebted peripheral members.
Dollar-denominated commodities often move inversely to the dollar, and a stronger U.S. currency typically pressures oil.
Unrest in the Middle East and North Africa is helping support oil and investors still worry the turmoil could spread to other oil-exporting nations in the region.
Gunmen on motorcycles attacked a car belonging to the Saudi Arabian consulate in the Pakistani city of Karachi on Monday killing a Saudi diplomat.
Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Manash Goswami in Singapore; editing by Dale Hudson and David Gregorio