Oil prices retreat on Europe's debt problems

December 16, 2011 2:05:05 PM PST
Europe's financial woes pushed oil prices lower Friday for a third straight day.he eurozone region continues to wrestle with a mountain of debt, and the only cure at hand appears to be a wave of severe spending cuts and pleas for more international aid. European Union leaders have hammered out a new plan for more central financial control and requirements for balanced budgets, but experts say those measures will do little to reduce current debts.

"That plan was a real bust," independent oil analyst and trader Stephen Schork said. "There's talk of real weakness now."

Spending cuts typically lead to declines in energy consumption. It also means fewer imports of manufactured goods from other countries like China and the U.S. Many experts think that the eurozone is already headed for a recession. Investors remain concerned that widespread bank failures could follow, and it may become increasingly difficult for businesses to raise money as more investors lose confidence in the eurozone economy.

Fitch ratings agency revised its outlook on France to "negative" from "stable" because of the country's hefty debt load. It also is considering a credit downgrade for six other nations that use the euro - Italy, Spain, Ireland, Belgium, Slovenia and Cyprus.

Benchmark crude fell 34 cents to end at $93.53 per barrel in New York. Prices fell as low as $92.52 earlier in the day.

Brent crude, which is used to price foreign oil that's imported by many U.S. refineries, fell 25 cents to finish at $103.35 a barrel in London.

The Labor Department reported Friday that consumer prices stayed flat in November, evidence that inflation is under control. Lower energy costs helped keep prices down overall.

Retail gasoline prices fell by a penny on Friday to a national average of $3.25 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has dropped nearly 75 cents from its peak in May, but it's still almost 27 cents higher than the same time last year.

In other energy trading, heating oil fell 2.2 cents to end at $2.8005 per gallon, and gasoline futures were virtually unchanged at $2.4870 per gallon. Natural gas finished unchanged at $3.127 per 1,000 cubic feet.

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