Oil Plunges as debt turmoil worsens

Oil declined to the lowest level in four days in New York, dropping to below $90 a barrel amid concern that Europe’s debt crisis is deepening.

Futures tumbled as much as 3.7 percent as the euro dropped to an 11-year low against the yen and the cost of insuring Spanish debt surged to a record. International creditors meet in Athens tomorrow as concern grows that Greece may not meet its bailout targets. Crude also fell after a Chinese central bank adviser said the nation’s economy may cool further, putting at risk demand in the world’s second-biggest crude consumer.

“The continuing saga of the euro, and in particular the travails of Spain and fears that this will soon be played out in France and Italy, is driving today’s sell-off,” said Christopher Bellew, senior broker at Jefferies Bache Ltd. in London, who predicts further price losses may be limited.

Crude for September delivery fell as much as $3.43 to $88.40 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.12 at 12:39 p.m. London time. The contract decreased 1.2 percent to $91.83 on July 20. Prices are 10 percent lower this year.

Brent oil for September settlement on the London-based ICE Futures Europe exchange dropped as much as $3.88, or 3.6 percent, to $102.95 a barrel. The European benchmark crude was at a $14.67 premium to New York-traded West Texas Intermediate grade. The spread was $15 on July 20, the widest in four days.

Bloomberg

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