UPDATE 9-Oil slips after Spain credit downgrade pressures

Tue May 29, 2012 8:48pm GMT
 

* Egan-Jones downgrades Spain's sovereign rating
    * Tensions over Iran nuclear program limit oil losses
    * Coming up: API oil data at 4:30 p.m. EDT Wednesday

 (Updates with additional detail, paragraphs 10, 18-19, 25)	
    By Robert Gibbons	
    NEW YORK, May 29 (Reuters) - Oil prices fell on Tuesday in
choppy trading, faltering after a downgrade of Spain's credit
rating sent the euro to nearly a two-year low against the
dollar.	
    Egan-Jones Ratings cut Spain's credit rating for the third
time in less than a month, which weakened the single currency
and rekindled fears of a spreading debt crisis in the euro zone.
  	
    "Crude oil prices dropped as soon as the Egan-Jones
downgrade of Spanish debt was announced," said John Kilduff,
partner at Again Capital LLC in New York.	
    "The reaction highlights the nervous state of the markets
over the slow creep toward the precipice of a market disruption
event in the euro zone," he added.	
    Before the downgrade, oil and equities had risen on optimism
about polls showing leads for Greek political parties in favor
of austerity and a report that China's biggest banks have
accelerated lending.  	
    Also supportive for oil were revived concerns about supply
disruptions because Iran's dispute with the West over Tehran's
nuclear program remains unresolved.	
    Brent crude for July delivery fell 43 cents to
settle at $106.68 a barrel, having swung from $106.06 to
$107.95.	
    U.S. crude oil futures lost 10 cents to settle at
$90.76 a barrel, off a high of $92.21. U.S. investors returned
to the markets after Monday's U.S. Memorial Day observance.	
    Brent's premium to U.S. crude CL-LCO1=R ended at $15.92
based on settlements.	
    Total crude trading volumes for Brent were 13 percent below
the 30-day average, with U.S. turnover 20 percent below its
30-day average.	
    U.S. RBOB gasoline futures held gains ahead of
Thursday's front-month June contract expirations for gasoline
and U.S. heating oil. 	
    Gasoline received support from expected stronger fuel demand
after the Memorial Day weekend, which marks the traditional
start of the U.S. summer driving season, and from recent sharp
drops in fuel inventories.	
    	
    SPAIN, GREECE ROIL MARKETS 	
    U.S. stocks rose on renewed hopes Greece will stay in the
euro zone, but gains in equities were curbed by Spain's problems
and by Facebook Inc's drop under $30 a share. 	
    Industrial feedstock copper fell for the first time in four
sessions after the news of Spain's credit downgrade. 	
    The Reuters/Jefferies CRB index of commodities eased
0.78 percent.	
    	
    	
    	
    IRAN	
    Oil's decline was limited by fears that talks between major
powers and Iran will fail to defuse the dispute over Tehran's
nuclear program. Tensions have kept investors cautious after
inconclusive discussions last week.	
    Iranian officials have thus far declined to grant U.N.
inspectors access to a complex at Parchin, the center of Western
suspicions that Iran is developing nuclear weapons capability.
  	
    Iran has significantly stepped up its output of low-enriched
uranium, and production in the last five years would be enough
for at least five nuclear weapons if refined much further, the
U.S.-based Institute for Science and International Security
(ISIS) said. 	
    The analysis was based on data in the latest report by the
U.N. International Atomic Energy Agency (IAEA).	
    Six world powers failed to persuade Iran last week to halt
its most sensitive nuclear work, but they will meet again in
Moscow next month.	
    	
    U.S. OIL INVENTORIES	
    U.S. crude oil stockpiles were expected to have increased
last week as imports continued to be robust, a preliminary
Reuters survey of analysts showed. 	
    Distillate and gasoline stocks were seen little changed.	
    Oil inventory reports will be delayed due to Monday's U.S.
holiday. Industry group the American Petroleum Institute will
release data on We dnesday at 4:30 p.m. EDT ( 2030 GMT), with the
government's report following on Thu rsday at 11 a.m. EDT (1 500
GMT). 	
    OPEC output in May hit its highest since 2008 as Saudi
Arabia maintained high rates and Iranian shipments did not fall
substantially more ahead of a European Union embargo set to
start in July, a Reuters survey found on Tuesday. 
 	
	
 (Additional reporting by Matthew Robinson in New York, Julia
Payne in London; and Luke Pachymuthu in Singapore; Editing by
David Gregorio and Dale Hudson)

Market Update

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UK £ USD =1.6781
Euro USD =1.3828
Rand USD =0.0948