Oil prices fall on global economic concerns
Oil fell Monday on the realization that a short-term fix in Spain won't offer a long-term solution to Europe's debt crisis.
A multi-billion dollar bailout loan for Spain's banks generated initial enthusiasm in the global stock, bond and energy markets. But by the close in New York, the good feeling had given way to skepticism.
Benchmark oil fell $1.40 to $82.70 per barrel in New York. Brent crude, which is used to price international varieties of oil, dropped 81 cents to $98.66 per barrel in London. The broad S&P 500 stock index fell nearly 1 percent.
Leaders of European countries agreed over the weekend to lend Spain up to $125 billion to help its troubled banking system. Spain is the fourth European country after Greece, Portugal and Ireland to request financial help since the debt crisis began.
Oil jumped above $86 per barrel in trading in Asia. But the relief was temporary, replaced by concern over Spain's ability to repay the money. The potential for Greece to abandon the European current still hangs over the market, as does a deepening recession in Italy. That turmoil, as well as slowing economic growth in China and the U.S., is reducing demand for oil, gasoline and diesel fuel.
It's not yet clear whether Europe's ongoing efforts to put the financial crisis to rest will result in an economic turnaround. "It just doesn't seem like that's very close," said Michael Lynch, president of Strategic Energy & Economic Research.
Meanwhile, oil supplies continue to build despite ongoing weak demand around the world.
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