The price of oil fell to its lowest for the year Monday on continued doubts about some European countries’ ability to pay off massive government debts. Benchmark West Texas Intermediate crude lost $1.35 to end the day at $94.78 per barrel on the New York Mercantile Exchange. That’s the lowest level since December 19. Brent crude, which helps set the price for oil imported by United States (US) refineries, gave up $1.26 to finish at $111 per barrel in London. Brent was last this low at the end of January. Oil declined as a leadership crisis in Greece raised doubts that it would comply with a eurozone-supported plan to get out of debt. Analysts see Greece as a test case for whether cash-strapped European nations can slash spending and improve their economies. Europe consumes 18 per cent of the world’s oil.
“You have to ask yourself who’s next after the Greeks,” said Gene McGillian, a broker and oil analyst at Tradition Energy. “What happens if Spain or other countries have similar troubles.”
Oil prices have been declining for most of the past two weeks as European leaders wrestled the debt crisis. The US also reported disappointing jobs growth and China’s manufacturing industry grew at a slower pace.
As the world’s economy appeared to slow down, major oil producing nations like Libya, Iraq and Saudi Arabia increased oil production, boosting supplies.
The decline in oil prices has helped make retail gasolene cheaper in the US. The national average fell by less than a penny over the weekend to $3.727 per gallon (98 cents a litre), according to auto club AAA, Wright Express and Oil Price Information Service.
In other futures trading, heating oil gave up 3.41 cents to end at $2.9295 per gallon, while wholesale gasolene lost 4.18 cents to finish at $2.959 per gallon. Natural gas dropped 7.8 cents to finish at $2.431 per 1,000 cubic feet.