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Oil prices rose on supply concerns and European plan to prevent the spread of debt crisis
NEW YORK (AP) ' Oil prices rose Tuesday on concerns that Middle East strife could disrupt supplies and on hopes that Europe's debt crisis wouldn't lead to worldwide financial gridlock.
West Texas Intermediate crude, the benchmark used to price oil in much of the U.S., rose $1.09 to end at $98.01 a barrel in New York. Brent crude, which is used to price oil produced in many foreign countries, rose $1.99 to finish at $108.65 a barrel in London.
Oil prices rose on worries that new international sanctions on Iran would reduce the flow of oil from the world's fourth biggest oil producer. Also large, violent protests in Egypt stirred fears that upheaval in the region could spread and disrupt supplies. Egypt is not a major oil producer, but it does control important energy supply lines and wields considerable influence in the region.
The worst fears about Europe's debt crisis ' that it could lead to a lending crisis and financial gridlock around the world ' were allayed somewhat Tuesday by the announcement of an International Monetary Fund plan designed to help prevent the debt crisis in Europe from spreading. The IMF plan would provide quick cash on flexible terms to countries facing sudden financial stress.
Concerns remain that Europe's debt crisis is pushing the region toward recession, which would slow industrial activity in Europe and in countries around the world that export to Europe.
In the U.S., the Commerce Department said the economy grew more slowly over the summer than the government had earlier estimated. That picture of a sluggish economy helped drive the stock market mostly lower Tuesday.
When the global economy slows, demand for crude oil and refined products like diesel and gasoline falls because fewer goods are produced and shipped, and people travel less. Even with Tuesday's gain, oil is down 5 percent since last Wednesday, when it spiked to $102.59 per barrel.
"The market is concerned on the one hand about the rate of economic growth," said Andrew Lipow, an independent oil analyst based in Houston. "On the other hand issues in the Middle East are continuing."
There was some encouraging economic news in the U.S., however, that helped push oil higher Tuesday. The government reported that inventories of goods fell over the summer. That raised hopes that the economy could grow faster than expected in the current quarter, if factories crank up to restock shelves.
And mild weather forecast for much of the U.S. over the Thanksgiving weekend is expected to motivate drivers to hit the road to visit families and shop. The price of gasoline futures rose nearly 3 percent, to finish at $2.5618 a gallon in New York, a gain of 7.28 cents.
At the pump, retail gasoline fell almost a penny to a national average of $3.34 per gallon on Tuesday, according to AAA, Oil Price Information Service and Wright Express. In coming days the higher price of wholesale gasoline could push up pump prices.
Gasoline demand has been falling in the U.S. for the past several months. It began to drop sharply as prices rose above $4 per gallon in many states last winter and spring. Current pump prices, while still high, are 16 percent below the peak national average of $3.98 per gallon reached on May 5.
In other energy trading in New York on Tuesday, natural gas rose 2 cents to finish at $3.4150 per 1,000 cubic feet, and heating oil rose 4 cents to end the day at $3.0346 a gallon.