Crude oil dropped on concern that European Union leaders won’t reach an agreement at a summit this weekend on strengthening the region’s rescue fund. Futures fell as much as 2.3 percent as draft documents detailing plans to enhance Europe’s bailout fund prompted criticism from some German lawmakers. The European Financial Stability Facility may be able to offer loans to countries “before they face difficulties raising funds” in bond markets, the draft guidelines obtained by Bloomberg News show. “The oil market is being driven by sentiment over the European debt crisis,” said David Greely, head of energy research at Goldman Sachs Group Inc. in New York. “The failure to have a resolution and the uncertainty that’s brought is having a major impact on the market.” Crude oil for November delivery declined $1.85, or 2.2 percent, to $84.26 a barrel at 12:12 p.m. on the New York Mercantile Exchange. November futures expire today. December oil, the most-actively traded contract, dropped $1.89, or 2.2 percent, to $84.40. Brent oil for December settlement declined 85 cents, or 0.8 percent, to $107.54 a barrel on the London-based ICE Futures Europe exchange. The fund may be authorized to grant credit lines amounting to 10 percent of a country’s economy, the draft shows. Some legislators from Chancellor Angela Merkel’s coalition said the changes, if approved at the Oct. 23 EU summit in Brussels, may shift intolerable burdens to German taxpayers. The newspaper Die Welt said that Germany hasn’t ruled out postponing the meeting. ‘Latest Headlines’ “We’re getting reports that there may not be an agreement this weekend after all,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The market continues to move back and forth on the latest headlines on the European debt situation.” The draft guidelines show that the EFSF, which is authorized to buy government debt, should buy no more bonds in the primary market than private investors. “We don’t know how the European debt crisis will work out, so the market will move wildly on any small bit of news,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion. “The situation in Europe is every bit as serious as the conditions just before the failure of Bear Stearns and Lehman Brothers.” The bankruptcy of Lehman Brothers Holdings Inc. in September 2008 and the near-collapse of Bear Stearns Cos. earlier that year helped usher in the global recession. Equity Market The Standard & Poor’s 500 Index fell 1 percent to 1,198.27, and the Dow Jones Industrial Average dropped 0.9 percent to 11,403.51. The euro dropped 0.6 percent to $1.3674. A weaker euro and stronger dollar reduce the appeal of raw materials as an investment. “We’re still following equities and the dollar,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “If there is a clear agreement to resolve the debt crisis this weekend we will see oil move to the mid-$90s.” Oil advanced earlier after an unexpected expansion of manufacturing in the Philadelphia region. The Federal Reserve Bank of Philadelphia’s general economic index increased to 8.7 from minus 17.5 last month, the biggest one-month rebound in 31 years. Economists forecast minus 9.4 for the gauge, according to the median estimate in a Bloomberg News survey. Qaddafi’s Death Libya’s Muammar Qaddafi, whose dictatorship lasted 42 years, died after being captured by forces led by the Misrata Military Council, the group said. Details will be announced later today in a news conference in Misrata, the council said in an e-mailed statement. Its troops led the assault on Qaddafi’s hometown of Sirte and act independently from the interim government, known as the National Transitional Council. The NTC is struggling to unite the factions that challenged the Qaddafi regime after protests in February were put down. The Misrata Military Council issued its comments as NTC officials gave their own statement in the eastern city of Benghazi, their base during the eight-month conflict. Libyan output rose 55,000 barrels to 100,000 last month, a Bloomberg News survey showed. Production in the North African nation has tumbled from 1.585 million barrels a day in January, the last month before an uprising against Qaddafi’s government. The loss of the country’s barrels has reduced the availability of light, sweet oil, in Europe, which bolstered Brent prices. “The death of Qaddafi probably won’t have much impact on the market,” Greely said. “The market had already moved on and is counting on the resumption of Libyan production.” Libyan production is set to reach an average 400,000 barrels a day in the fourth quarter of 2011, with output closer to 600,000 barrels a day at the end of the year, The International Energy Agency said in a Oct. 12 report. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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