BUSINESS

Crude oil falls to US$87.24 a barrel on concerns about European economy

09/09/2011 05:49 EDT | Updated 11/09/2011 05:12 EST
NEW YORK, N.Y. - Oil futures tumbled Friday on growing concerns about Europe's economy.

Benchmark West Texas Intermediate crude fell $1.81, or two per cent, to finish at US$87.24 per barrel in New York. Brent crude lost $1.78 to end at US$112.77 a barrel in London.

Prices dropped after the European Central Bank said a top official was leaving unexpectedly. Juergen Stark, the bank's top economist, resigned for personal reasons, but analysts took his departure as a sign of deepening divisions over how to solve Europe's debt crisis.

Europe is a major consumer of diesel fuel, and its economic woes have sent tremors through world markets.

"We're all interconnected," independent analyst Andrew Lipow said. "If the European economy slows down, it'll slow down spending on things that matter in the U.S., like tourism."

The ECB announcement pushed up the dollar, as the euro fell. That likely pulled oil even lower. Crude is priced in U.S. currency and tends to fall when the dollar rises and makes oil more expensive for investors other currencies.

Analysts also noted that Libya appears ready to start exporting oil again. After seven months of unrest that shut down its petroleum industry, Libya plans to load about 600,000 barrels of crude on to a tanker next week, according to Addison Armstrong, director of market research at Tradition Energy.

That's a tiny amount, compared with the 1.5 million barrels per day that Libya used to export. Still it's a promising sign that Libyan oil could soon be back on world markets.

Meanwhile the heart of America's oil industry appeared to be safe from two tropical storms that threatened Gulf of Mexico oil platforms and refineries earlier in the week. Tropical storm Nate curled West in the Gulf toward Mexico. And a weak tropical storm Maria in the Atlantic was on track to head north, off the East Coast.

In other energy trading, heating oil fell 5.85 cents, or almost two per cent, to finish at US$2.9858 a U.S. gallon (3.79 litres) and gasoline futures lost 11.42 cents, or four per cent, to end at US$2.771 a gallon. Natural gas fell 6.5 cents to finish the day at US$3.915 per 1,000 cubic feet.

(TSX:ECA), (TSX:IMO), (TSX:SU), (TSX:HSE), (NYSE:BP), (NYSE:COP), (NYSE:XOM), (NYSE:CVX), (TSX:CNQ), (TSX:TLM), (TSX:COS.UN), (TSX:CVE)