By Claudia Assis, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell Monday on worries about the U.S. debt ceiling and the vulnerability of European banks to the region’s debt woes, with a higher U.S. dollar adding pressure.
Crude for August delivery CL1Q -2.05% retreated $2, or 2.1%, to $95.19 a barrel on the New York Mercantile Exchange.
Prices rallied Friday on a weaker dollar, and gained 1% last week.
Europe’s troubled outlook was helping the dollar on Monday, however. The dollar index DXY +0.63% , which compares the U.S. unit to a basket of six currencies, traded at 75.597 from 75.148 late Friday.
A protracted debt-ceiling debate in Washington and, mainly, the European sovereign-debt crisis unfolding are the top reasons for the lower oil, said Matt Smith, an oil analyst with Summit Energy in Kentucky.
Investors fear a default for Spain or Italy, he added. These are bigger economies than the bailed-out Greece, Ireland and Portugal.
Results from Europe’s bank stress tests pressured oil. Some brokerages’ analyses of the tests, whose results were released Friday, concluded they were too lenient and that more banks would have failed if the regulators had factored in losses on sovereign debt. Read more on bank stress tests.
Worries about the economic recovery and potential for less demand for oil have kept prices mostly lower in recent weeks.
“Longer-term, we are bullish on oil. At some point, there will be much greater demand than available supply. But, our long-term bullish scenario in oil is largely predicated on a full-fledged global economic recovery,” analysts at Cameron Hanover said in a note to clients.
The world has never seen an economic recovery with crude-oil prices at more than $30, they added. “At $100 a barrel, we do not see how we can have a strong economic recovery in much of the world. And that makes demand unlikely to reach its potential,” the analysts said.
Brent oil, the European benchmark, held up better than oil trading on Nymex. Brent futures declined $1.50, or 1.3%, to $115.79 a barrel on ICE Futures in London.
European oil markets are still feeling the pinch from the loss of Libyan oil, even after the release of emergency reserves from member countries of the International Energy Agency, Summit Energy’s Smith said.
Other energy products traded lower Monday, with August gasoline RB1Q -1.07% declining 4 cents, or 1.5%, to $3.08 a gallon.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
