Oil wavers on weak home sales, Europe debt woes

AP News
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Posted: Sep 26, 2011 2:59 PM
Oil wavers on weak home sales, Europe debt woes

Oil hovered around $80 a barrel Monday after new home sales dropped to a six-month low, adding to worries about energy demand in the slowing economy.

The Commerce Department said that sales of new homes fell in August and are on pace for the worst year since the government began keeping records a half century ago. High unemployment and the possibility of another recession are keeping home buyers on the sidelines.

The discouraging government report came as European leaders continued to debate the best way to resolve the months-old debt crisis that could drag down the regional economy. Investors are concerned that Europe's problems could lead to another recession, which would cut demand for oil and gasoline. Demand for gasoline in the U.S. is already below year-ago levels.

Benchmark oil rose 39 cents to finish at $80.24 per barrel in New York. Crude has traded between about $79 per barrel and $90 per barrel this month.

It is "just a wild, wild ride now and people are just very nervous at this point," oil trader Stephen Schork said. "I think it's a real concern that we just very well might be in another recession."

Meanwhile Italian energy giant Eni said that Libya has resumed partial oil production for the first time since unrest broke out in February. About 31,900 barrels of oil per day are being produced. Previously Libya exported about 1.5 million barrels of oil per day, which was less than 2 percent of the world's demand. Some experts say it could take a year or more to get Libyan production back to that level.

More Libyan exports could lead to lower prices for Brent crude as more and more oil is put on the global market, PFGBest analyst Phil Flynn said. That could eventually mean a drop in the price of gas, much of which is refined from Brent. In London, Brent crude fell 3 cents to end at $103.94 per barrel on Monday.

At the pump, gas prices fell about a penny on Monday to $3.49 per gallon, according to a survey by AAA, Wright Express and the Oil Price Information Service. That's 11 cents less than a month ago and 79 cents more than a year ago.

In other energy trading, heating oil fell less than 1 cent to finish at $2.8030 per gallon, gasoline futures rose less than a penny to end at $2.5284 per gallon and natural gas rose 8.1 cents to finish the day at $3.782 per 1,000 cubic feet.