Oil prices fall on Europe's economic woes

AP News
Posted: Jul 20, 2012 4:04 PM
Oil prices fall on Europe's economic woes

The price of oil is dropping on fresh concerns about Europe's economy.

Benchmark oil fell $1.22 on Friday to end at $91.44 per barrel in New York. Brent crude, which is used to price international varieties of crude, was down 97 cents to finish at $106.83 in London. This was the first decline after seven straight gains.

The main focus for traders was Spain, where the government predicted that the country's recession will extend into next year and the region of Valencia said it needed help from the central government to pay its bills. But Germany was also a concern as finance officials there said growth in Europe's strongest economy likely slowed somewhat in the second quarter. Meanwhile, in the U.K. the government said it had to borrow more than expected last month.

Europe's lengthy battle with a massive government debt crisis has affected industries in other countries, such as the U.S., that do business there. It also has cut demand for oil and other energy products.

Oil had risen about 10 percent over seven days on concerns that renewed tensions between the West and Iran could result in a disruption of oil supplies from the Persian Gulf.

"After the long run-up in prices we've had the last 10 days or so, I think (events in Europe) kind of reminded people that the demand picture is still not very rosy," said Michael Lynch, president of Strategic Energy & Economic Research.

Meanwhile, natural gas prices hit the highest level since early January as businesses and consumers cranked up air conditioning systems to stay cool in the hot weather. Natural gas rose by 8.2 cents to finish at $3.081 per 1,000 cubic feet.

The price of natural gas fell below $2 for the first time in more than a decade in April after a production boom boosted inventories. At the same time, a mild winter kept demand in check. The cheaper prices prompted many utilities to switch to natural gas from coal to fuel their generators.

At the pump, the national average for gasoline rose by a penny overnight to $3.447 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That's 5.9 cents more than a week ago but still 23.7 cents less than a year ago.

In other trading, heating oil fell by 2.27 cents to finish at $2.9243 per gallon and wholesale gasoline prices added less than a penny to end the week at $2.943 per gallon.