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Oil drops below $93 in Europe, pausing October's huge rally driven by EU debt plan hopes
Oil prices dropped below $93 a barrel Friday after surging the previous session amid investor optimism Europe's plan to contain its debt crisis will help boost global economic growth.
By early afternoon in Europe, benchmark crude for December delivery was down $1.35 at $92.61 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $3.76, or 4.2 percent, to settle at $93.96 in New York on Thursday.
Nymex crude has surged about 24 percent from $75 on Oct. 4 on expectations Europe would be able to keep Greece's soaring debt levels from mushrooming into a financial and economic crisis.
On Thursday, EU leaders announced a plan that will cut Greek debt and require bondholders to accept a 50 percent loss. The plan also included boosting the bailout fund's firepower to about euro1 trillion ($1.39 trillion).
Global stock markets, which oil traders often look to as a barometer of overall investor confidence, jumped after the deal was announced. On Friday, however, European indexes were mostly slightly lower.
The debt plan also helped boost the euro, which has climbed above $1.40 for the first time since early September. A weaker dollar makes commodities less expensive for investors with other currencies. The euro was trading at $1.4167, down from $1.4216 late Thursday in New York .
"Markets gave an unequivocal vote of confidence to the summit deal," energy consultant Cameron Hanover said in a report. "Clearly, the strength in the euro and in equities helped push oil prices higher."
Easing fears that the U.S. economy will soon slip into recession has also helped push crude higher this month. The U.S. said Thursday its gross domestic product grew 2.5 percent in the third quarter, up from 1.3 percent growth in the second and 0.4 percent in the first.
"With so many observers fearing a retreat back into recession, the growth of 2.5 percent seemed remarkably robust," Cameron Hanover said.
In London, Brent crude was down $1.41 at $110.67 a barrel on the ICE Futures exchange.
"It is remarkable that the price rally this week was restricted to" the Nymex contract, "while the price of Brent has barely gained since the start of the week," said analysts at Commerzbank in Frankfurt. "This could be an indication that the upward potential for Brent is virtually exhausted and a price slump can be expected once the excessive euphoria on financial markets at present starts to fade."
In other Nymex trading, heating oil fell 2.81 cents to $3.0756 per gallon and gasoline futures slid 2.77 cents at $2.6795 per gallon. Natural gas advanced 5.5 cents at $3.819 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.