Oil drops to lowest level in 6 months


THE price of oil dropped to a six-month low yesterday on renewed concern that Greece would be forced to leave the European common currency and trigger shockwaves across Europe.

Benchmark West Texas Intermediate crude gave up 80 cents to end the day at US$93.98 per barrel on the New York Mercantile Exchange. Oil hasn't finished this low since Dec. 19.

Prices have been falling for most of the past two weeks as Western economies appeared to slow, likely reducing their demand for petroleum fuels, while crude production rose in Saudi Arabia and other oil-rich countries. In Greece, party leaders have failed to form a government after voters ousted numerous lawmakers that favored spending cuts and other debt-trimming austerity measures prescribed by the European Union.

The austerity measures had briefly reassured investors and economists. But Greece is again undermining confidence in a eurozone economy that would be in recession if not for Germany. If Greece won't comply with eurozone spending reforms, analysts said, it raises doubts about the ability of other indebted eurozone countries to follow through as well.

"Investors don't know what to make of Europe," independent analyst and trader Stephen Schork said. "Greece is an absolute mess, and that's translating into a weaker euro. Germany is the only strong economy on the continent."

A slowdown in Chinese manufacturing growth and disappointing jobs growth in the US also have helped push oil prices lower this month. Benchmark crude prices have dropped more than 11 percent in May so far.

The US government also reported yesterday that retail sales were basically flat last month. Sales of autos, furniture and electronics rose in April, however, and Americans spent more at restaurants and bars.

Gasoline prices were flat at US$3.727 per gallon (about US$1 a liter), according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded has dropped by nearly 21 cents since topping out at US$3.936 in early April.

MasterCard SpendingPulse, which estimated gasoline demand across the US, said yesterday that motorists bought less gasoline, on average, for the 60th consecutive week. Its four-week estimate of gasoline consumption dropped by 5.2 percent to 61.1 million barrels.

In other futures trading, heating oil added less than a penny to end at US$2.933 per gallon while wholesale gasoline lost 1.49 cents to finish at US$2.9441 per gallon. Natural gas rose by 6.9 cents to US$2.50 per 1,000 cubic feet.

Brent crude, which is used to set the price of oil imported by US refineries, added 45 cents to finish at US$111.45 per barrel in London.



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