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Oil below $97 amid debt crisis, US economy jitters

New York, NY -- Oil prices slipped below US$97 a barrel on July 18 as weakening US consumer confidence and more signs of financial stress in Europe renewed concerns about demand for crude.


New York, NY — Oil prices slipped below US$97 a barrel on July 18 as weakening US consumer confidence and more signs of financial stress in Europe renewed concerns about demand for crude.

By early afternoon in Europe, benchmark oil for August delivery was down 80 cents to $96.44 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose $1.55 to settle at $97.24 on Friday.

In London, Brent crude fell 52 cents to $116.74 per barrel on the ICE Futures exchange.

On Friday, eight of 90 European banks flunked stress tests designed to gauge how they would fare in another recession, and 16 more barely passed. Investors in Europe have been rattled by concern Greece’s debt crisis could spread to other EU countries and further undermine already weak economic growth.

Traders are also eyeing the US, where lawmakers have yet to agree on government spending two weeks from a deadline about raising the debt ceiling. Ratings agencies have put the US credit rating on downgrade watch as a result.

Consumer confidence fell in July 2011 to its lowest in more than two years, according to a Thomson Reuters/University of Michigan survey released July 15.

“The economic headlines of the last several months have been less than encouraging, especially when it comes to our homes and our jobs,” energy consultant The Schork Group said in a report. “So it comes as little surprise that confidence among consumers is now back at levels last seen during the Great Recession.”

Considering Monday’s gains by the dollar – the euro was down to $1.4027 from $1.4136 late Friday – oil prices were falling less than expected. A strong dollar makes commodities like crude more expensive for investors holding other currencies and usually pushes prices down.

Oil prices are standing their ground relatively well given the strong US dollar,” said analysts at Commerzbank in Frankfurt. “It shows investors’ growing interest in commodity investments which are in high demand amid the uncertainty on equity and foreign exchange markets.”

In other Nymex trading in August contracts, heating oil fell 1.2 cents to $3.1064 a gallon while gasoline dropped 1.02 cents to $3.1191 a gallon. Natural gas futures lost 2.4 cent to $4.496 per 1,000 cubic feet.

(Source: AP and OfficialWire. Alex Kennedy in Singapore contributed to this report.)