--Gasoline prices remain supported by refinery issues
By Dan Strumpf
NEW YORK--Oil futures retreated Monday, as concerns about the euro zone's debt crisis renewed fears over slowing oil demand, while discord among Iran's political elite worsened.
Light, sweet crude for November delivery fell 57 cents, or 0.6%, to $89.31 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe fell 23 cents, or 0.2%, to $111.79 a barrel.
Futures declined for a second-straight session as a meeting of top euro-zone officials began in Luxembourg, with investors awaiting signs on how Europe will address Spain's worsening financial crisis.
"Everyone is wondering whether Spain is going to get a bailout," said Phil Flynn, analyst at Price Futures Group. "It's the risk-off trade this morning."
Europe's troubles have weighed on the oil market, as the continent's financial crisis has curbed oil demand and raised fears the economic troubles could spread elsewhere.
The news helped boost the dollar against the euro, which also eroded oil prices by making the dollar-denominated commodity more expensive for holders of other currencies. The ICE Dollar Index recently rose 0.3% to 78.568.
Sunday, Iranian lawmakers criticized President Mahmoud Ahmadinejad over the decline of Iran's currency and his handling of the economy. The Iranian president has been under fire from rivals for months over his failure to resolve the standoff between Tehran and the West over its nuclear program.
Investors are taking the move as a sign Western sanctions are working, lessening the odds of an imminent military strike by Israel or a broader conflict that could undermine crude-oil supplies.
Oil prices have fallen about 3% this month, as the market's focus has shifted back to concerns over slowing demand. Weakness in the U.S., Europe and China--the world's biggest oil consumers--have weighed on the market. Friday's relatively upbeat U.S. jobs report failed to stem the recent slide.
One source of upside for the market has been a series of recent refinery issues in the U.S., which has sent the price of gasoline surging. In California, retail prices are closing in on $5 a gallon, although prices in the wholesale market fell Friday.
Last week, Valero Energy Corp. (>> Valero Energy Corporation), the biggest refiner in the U.S., said it would stop selling gasoline on the spot market. Exxon Mobil Corp. (>> Exxon Mobil Corporation) said it would allocate gasoline supplies to some West Coast distribution centers.
However, Hussein Allidina, commodity analyst at Morgan Stanley, described the refinery glitches as "one-off issues."
"As refiners return from maintenance (which peaks during the third week of October), runs increase and conditions normalize," Mr. Allidina wrote in a report.
Separately, the differential between Brent crude and the benchmark Nymex contract widened to its highest level since October 2011. Elevated inventories and surging production in the U.S. have weighed on the domestic contract, while tensions elsewhere in the Middle East continue to support Brent.
The gap between the two contracts recently stood at more than $22 a barrel. Historically, the two contracts have traded almost in lockstep.
Front-month November reformulated gasoline blendstock, or RBOB, recently fell 0.73 cent, or 0.2%, to $2.9452 a gallon. November heating oil fell 0.15 cent to $3.1544 a gallon.
