By Margot Habiby May 21 (Bloomberg) -- Crude oil fell as European governments struggled to contain the region’s debt crisis, raising concern that it will slow the global economic recovery. Futures dropped as much as 2.5 percent as European Union finance ministers plan to meet today in Brussels to discuss sovereign debt. U.S. petroleum inventories climbed to the highest level in at least 20 years for the middle of May. “The worry is that the European economy is going to drag the global economy into another recession,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said in an interview. “Because 2008 is so fresh in everybody’s mind, everyone I talk to is just petrified.” Crude oil for July delivery dropped 78 cents, or 1.1 percent, to $70.02 a barrel at 10:35 a.m. on the New York Mercantile Exchange. The July contract has dropped for nine consecutive days, losing 13 percent since May 10. Prices are down 7.2 percent this week. Oil prices plummeted almost $115 a barrel between July and December 2008. Supplies of oil and all petroleum-based fuels jumped to 1.81 billion barrels in the week ended May 14, the highest stockpiles on a seasonal basis in Energy Department data through 1990. High inventories have driven down the profit margin from refining crude into gasoline and heating oil from a 15-month high. The crack spread for July has dropped 14 percent this week, based on Nymex futures prices. Gasoline U.S. gasoline production in April rose to the second- highest monthly total on record, according to the American Petroleum Institute today. Refineries produced an average 9.1 million barrels of gasoline a day last month, up 3 percent from a year before, according to the Washington-based industry group. Gasoline for June delivery fell 9 cents to $1.9636 a gallon. Futures have dropped 7.8 percent this week. The Standard & Poor’s 500 Index dropped the most in 13 months yesterday on the European concerns and as U.S. jobless claims increased. “We have this evaporation of risk premium as everyone exits the equity space, and oil is the antithesis of a safe haven at the present time,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, consulting firm. The S&P 500 rebounded today after falling below the lowest level from the May 6 crash. The index rose 0.5 percent to 1,076.51. The Dow Jones Industrial Average advanced 29.4 points, or 0.3 percent, to 10,097.41. Brent crude oil for July settlement rose 17 cents to $72.01 a barrel on the ICE Futures Europe exchange in London. Oil may rise next week on speculation stock markets will rebound and the dollar will retreat, according to a Bloomberg News survey. Twenty-two of 41 analysts and traders, or 54 percent, forecast oil will increase through May 28. Fourteen respondents, or 34 percent, predicted futures will decline and five said prices will be little changed. Last week, 52 percent of survey respondents said oil would gain this week. To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

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