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Oil slips to near $99 in Europe on concerns about eurozone's debt crisis effects on growth
Oil prices retreated to near $99 a barrel Wednesday as investors focused on worries about Europe's debt crisis rather than indications of tighter oil supplies and positive retail sales figures in the United States.
By early afternoon in Europe, benchmark crude for December delivery was down 40 cents at $98.97 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.23 to settle at $99.37 in New York on Tuesday.
In London, Brent crude for January delivery dropped 53 cents to $111.65 a barrel on the ICE Futures exchange.
Concerns about the effects of the eurozone debt crisis on European growth continued to weigh on investors' minds and rising interest rates on Italian and French bonds put additional pressure on the euro.
On Tuesday, fresh data showed the eurozone's economy grew by just 0.2 percent in the third quarter of the year, the same rate as in the second quarter.
"Higher risk aversion as the debt crisis in euro countries escalates and a firmer U.S. dollar are putting pressure on commodity prices again," said analysts at Commerzbank in Frankfurt.
A stronger dollar tends to result in lower oil prices by making crude more expensive for investors holding other currencies. The euro was down to $1.3470 from $1.3543 late Tuesday in New York.
The American Petroleum Institute said late Tuesday that crude inventories added 1.3 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 1.5 million barrels.
Inventories of gasoline, however, fell 2.9 million barrels last week while distillates dropped 2.6 million barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data ' the market benchmark ' later Wednesday.
"While external factors such as risk appetite, equity markets and the U.S. dollar drove oil prices up in the first half of the year and the fundamental data weighed on prices, the picture has meanwhile changed, " Commerzbank said. "Now, tightening supply is supporting oil prices, while headwind is coming from financial markets."
Crude has surged from $75 in early October amid growing investor optimism that the U.S. economy will avoid a recession this year. The Commerce Department said Tuesday that retail sales rose in October for the fifth straight month.
Traders will also be closely watching the latest figures on U.S. industrial production and housing this week.
In other Nymex trading, heating oil fell 2.10 cents to $3.1503 per gallon and gasoline futures added 2.03 cents to $2.6060 per gallon. Natural gas rose 1.5 cents to $3.419 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.