Nov. 7 (Bloomberg) -- Oil dropped the most this year in New York after President Barack Obama won re-election and Greece prepared to vote on austerity measures.
Futures slid 4.8 percent as Obama defeated Republican Mitt Romney. He now faces negotiations with Congress to avoid more than $600 billion in mandated tax gains and spending cuts. Greece’s parliament votes today on a package to unlock bailout funds. Oil extended losses after a government report showed that U.S. crude and fuel supplies rose last week.
“The prospect of the fiscal cliff is a dark cloud over the market,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “We need the two sides to come to a mutual deal that avoids this prospect, and I don’t know if I would bet on that occurring after the bitter campaign.”
Crude oil for December delivery fell $4.27 to settle at $84.44 a barrel on the New York Mercantile Exchange. It was the biggest decline since Dec. 14. Prices have decreased 15 percent this year.
Brent oil for December settlement slid $4.25, or 3.8 percent, to $106.82 a barrel on the ICE Futures Europe exchange.
While Obama, a Democrat, received at least 303 electoral votes to Romney’s 206, Republicans kept a majority in the House of Representatives. Democrats retained control of the Senate.
“We definitely need a grand bargain to get past the fiscal cliff; whether we get one is an open question,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. “This is going to be an interesting couple of months.”
The Standard & Poor’s 500 Index and the Dow Jones Industrial Average each dropped 2 percent. The dollar climbed as much as 0.6 percent against the euro. A stronger U.S. currency reduces the appeal of dollar-denominated raw materials as an investment. The S&P’s GSCI Index of 24 raw materials fell as much as 2.6 percent, led by declines in crude and gasoline.
“With the election over, we can look ahead to other issues,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The focus will be on the fiscal cliff and Europe, neither of which is cause for celebration.”
Greek Prime Minister Antonis Samaras seeks parliamentary approval today for budget cuts to unlock bailout funds amid the third general strike in six weeks.
The 238 pages of austerity measures range from raising the retirement age two years to 67 to eliminating Christmas and holiday payments for pensioners. Approval of the legislation is the first of the votes required by Nov. 12 to unlock a 31 billion-euro ($40 billion) package of international aid.
Oil supplies increased 1.77 million barrels to 374.8 million barrels last week, the Energy Department said today. Stockpiles were forecast to gain 2 million barrels, according to the median of 11 analyst estimates in a Bloomberg survey.
Gasoline inventories rose 2.88 million barrels to 202.4 million, the highest level since the week ended Aug. 17, the report showed. Inventories of distillate fuel, a category that includes diesel and heating oil, increased 131,000 barrels to 118.1 million, the first gain in eight weeks.
Total U.S. fuel consumption decreased 0.5 percent to 18.8 million barrels a day in the four weeks ended Nov. 2, the report showed. Gasoline demand slipped 0.8 percent to 8.59 million barrels a day, the lowest level since March.
U.S. crude oil production climbed 8,000 barrels a day to 6.68 million barrels a day, the most since December 1994, the Energy Department report showed. Output has jumped for nine straight weeks, the longest string of increases since 2008.
The department reduced its crude-oil price projection for 2012 yesterday on speculation that global production will outpace demand during the fourth quarter. Oil in New York will average $94.51 a barrel this year, down from the October forecast of $95.55, the department said in its monthly Short- Term Energy Outlook. Futures will average $88.29 in 2013.
“The global oil market is clearly oversupplied,” Emerson said. “This will remain in the background as we move ahead.”
The Obama administration is likely to offer Iran a deal to test whether diplomacy can end the country’s nuclear program or if military force will be necessary, Robert Satloff, executive director of the Washington Institute for Near East Policy, an independent research center, said in an e-mail.
“Obama’s re-election reduces the likelihood of military action against Iran,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “The reduced risk of conflict is probably weighing on prices today.”
Iranian crude output fell 200,000 barrels a day to 2.65 million in October, the lowest level since February 1990, according to a Bloomberg survey of oil companies, producers and analysts. Sanctions aimed at stopping the Islamic republic’s nuclear program have hindered its ability to export crude oil.
Electronic trading volume on the Nymex was 664,920 contracts as of 3:53 p.m. Volume totaled 590,709 contracts yesterday, 14 percent above the three-month average. Open interest was 1.61 million.