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Falling euro pushes oil price below $95 for first time this month
NEW YORK (AP) ' Growing concerns about the European debt crisis on Wednesday pulled oil prices down to their lowest level this month.
Prices tumbled early in the day as traders focused on Europe's credit problems and its weakening currency. Oil has wavered around the $100-per-barrel mark for the past month while eurozone leaders wrestled with ballooning government debts. Now analysts say that the latest financial reforms won't fix underlying credit problems within the 17-nation currency bloc.
Europe is expected to fall back into recession, and investors fear that the banking system could collapse, if nations don't find a way to reduce debts soon.
Benchmark crude fell $5.19, or 5.2 percent, to end the day at $94.95 per barrel in New York. Prices dropped as low as $94.21 ' the lowest since Nov. 7. Brent crude, which is imported by some U.S. refineries, lost $4.83, or 4.4 percent, to finish at $104.25 a barrel in London.
A key indicator of Europe's debt problems, the euro, fell to its lowest level against the dollar in 11 months. Economists pointed out that mew requirements for balanced budgets and more central control may keep nations from building sizable debts in the future, but they do little to reduce the massive debts that are already on the books.
When the euro falls, it indirectly pulls oil lower by lifting the value of the dollar. Oil is priced in dollars, and it becomes more expensive ' and less attractive as an investment to foreign buyers ' as the dollar rises.
Oil prices have traded as low as $75.67 and as high as $113.93 this year.
In the U.S., the government reported that oil demand last week fell by 5.6 percent compared to a year ago, while wholesale gasoline demand dropped by 4.5 percent. Demand for distillate fuel, which includes diesel, rose 1.8 percent and jet fuel demand fell 2.6 percent.
The Energy Information Administration report said the nation's oil supplies fell by about 2 million barrels last week. That was close to analysts' forecasts. Gasoline supplies rose by nearly twice what was expected.
Retail gasoline prices slipped by half a cent to a national average of $3.264 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 15 cents cheaper than it was a month ago, but it's still nearly 29 cents higher than a year ago.
Although they have declined in recent weeks, pump prices are still on track to be the highest ever this year with a 2011 average of $3.52 per gallon. Gasoline was cheapest at the beginning of the year at $3.07 per gallon. The national average rose as high as $3.98 in April with Middle East unrest, tightened oil supplies and forecasts for record oil demand. Prices began to slide as the economy cooled off, major industrialized countries released emergency stockpiles and U.S. drivers conserved gasoline.
Meanwhile, the Organization of Petroleum Exporting Countries said Wednesday that it will keep oil production targets at 30 million barrels per day. OPEC countries typically flaunt the group's production quotas, but traders still took the announcement as an indication that OPEC will not try to control oil prices in coming months.
Libya also said that it is pumping 1 million barrels per day of oil, about two-thirds what it produced before the uprising that brought down Moammar Gadhafi broke out earlier this year. Experts say Libya should return to its previous production levels early next year.
In other energy trading, heating oil lost 9.89 cents, or 3.4 percent, to end the day at $2.8299 per gallon, while gasoline futures fell by 12.2 cents, or 4.6 percent, to finish at $2.5037 per gallon. Natural gas futures lost 14.3 cents, or 4.4 percent, to finish at $3.136 per 1,000 cubic feet.