Oil steady as worries about Europe continue

AP News
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Posted: Jun 20, 2011 3:19 PM
Oil steady as worries about Europe continue

Oil leveled off Monday with investors still concerned about the European financial crisis.

Benchmark crude for July delivery gained 25 cents to settle at $93.26 per barrel on the New York Mercantile Exchange. The July contract expires on Tuesday, and most of the trading switched to the August contract, which added 23 cents to settle at $93.63 per barrel.

All eyes remain on Greece, which is trying to implement tough new austerity measures necessary to keep international aid coming to deal with its debt crisis. Without that aid, investors worry that Greece's financial troubles could spread to other European countries.

Credit ratings agency Moody's has warned that it may downgrade its debt rating on three of France's largest banks because of their exposure to Greek debt. Moody's said Monday that it may reduce Italy's credit rating due to poor growth prospects and high public debt.

"The fear is that we end up with a banking crisis like 2008," said Michael Lynch, president of Strategic Energy & Economic Research. "It's a small possibility, but people are reacting to that."

Oil stayed just above $93 per barrel on Monday despite rising stock markets. The Dow Jones Industrial Average was up about 60 points in afternoon trading. The Nasdaq and the Standard & Poor's 500 were higher as well.

The dollar was fairly steady on Monday. Lynch said he expects it to remain strong until investors are convinced that Greece will go through with plans to cut spending and raise taxes. It's expected to vote on the austerity package by the end of the month.

A stronger dollar usually pushes oil lower. Oil is priced in dollars and tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.

Gas pump prices slipped to $3.646 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 22.1 cents cheaper than a month ago, but it's still 91.2 cents higher than the same time last year.

In other Nymex trading for July contracts, heating oil lost 5.1 cents to settle at $2.932 per gallon and gasoline futures dropped 3.5 cents to settle at $2.912 per gallon. Natural gas gave up less than a penny to settle at $4.317 per 1,000 cubic feet.

In London, Brent crude fell $1.52 to settle at $111.69 per barrel on the ICE Futures exchange.

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Chris Kahn can be reached at http://www.twitter.com/ChrisKahnAP