The price of oil fell Friday by another $1 to below $91 a barrel, as the prospect of U.S. government spending cuts raised concerns about oil demand in the world's leading economy.
By early afternoon in Europe, benchmark crude for April delivery was down $1.20 to $90.85 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the Nymex contract fell 71 cents to close at $92.05.
While there have been signs of an improving U.S. economy in the past weeks, attention Friday was focused on the increasing likelihood that about $85 billion in spending cuts could start taking effect later in the day as part of an earlier budget agreement between the White House and Congress.
The International Monetary Fund has predicted that the spending cuts could reduce U.S. growth by some 0.5 percentage points in 2013.
"We expect high volatility and nervous trading across the oil market today," said a report from Sucden Financial Research in London. "The full effect of the automatic cuts will be 'endorsed' over seven months and Congress can stop them at any time if the two parties agree on how to do so."
Uncertainty over economic and political developments in Europe, including rising unemployment and the results of elections in Italy, strengthened the dollar against the euro, further weighing on oil prices.
Commodities priced in dollars, such as crude oil, become more expensive and a less inviting investment for traders using currencies other than the greenback. On Friday, the euro was down to $1.3007 from $1.3066 late Thursday in New York.
Brent crude, used to price many kinds of oil imported by U.S. refineries, was down $1.07 at $110.31 a barrel on the ICE Futures exchange In London.
In other energy futures trading on the Nymex:
- Wholesale gasoline retreated 3.34 cents to $3.0783 a gallon.
- Heating oil lost 2.48 cents to end at $2.9355 a gallon.
- Natural gas was down 1.5 cents at $3.471 per 1,000 cubic feet.