Oil fell as investors bet that Europe’s worsening debt crisis will slow the economy and as the euro tumbled the most in a week against the dollar. Futures dropped 1.4 percent on speculation that European leaders won’t agree on a way to contain the region’s financial problems at a summit this week. Futures also fell as equities declined amid concern that U.S. lawmakers will fail to reach a deal on the country’s debt limit two weeks before a deadline. “Some of the fears of the debt crisis seem to be weighing on the market to start the week,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The dollar is higher and that’s kind of weighing on prices.” Crude for August delivery dropped $1.31 to settle at $95.93 a barrel on the New York Mercantile Exchange. Futures have risen 26 percent in the past year. Brent oil for September settlement slipped $1.21, or 1 percent, to $116.05 a barrel on the ICE Futures Europe exchange. Prices are 54 percent higher than a year ago. Brent was $19.80 a barrel more expensive than September futures traded in New York. The spread between the two contracts reached a record $22.63 a barrel on July 14. The euro fell 0.6 percent to $1.4079 in New York. A weaker euro and stronger dollar curbs the appeal of commodities as an alternative investment. Focus on Europe The special summit by European leaders this week comes after eight of the region’s banks failed stress tests. European Central Bank President Jean-Claude Trichet repeated his opposition to any restructuring of Greek debt. “It seems the focus is back on concerns with Europe,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Over the weekend, it looks like some of the solidarity with the bailouts has gone. We’re seeing flight to quality again to the dollar and to gold and silver, which is coming at the expense of oil right now.” Gold rose to a record $1,607.90 an ounce, capping the longest rally in 31 years, as debt concerns in Europe and the U.S. boosted demand for the metal as a haven. Futures for August delivery rose $12.30, or 0.8 percent, to settle at $1,602.40 on the Comex in New York. U.S. Debt Ceiling U.S. negotiators face an Aug. 2 deadline to raise the $14.3 trillion U.S. debt ceiling and avoid jeopardizing the nation’s top credit rating. Standard & Poor’s Ratings Services and Moody’s Investors Service are threatening to downgrade the government’s credit rating if Congress doesn’t act. “People are getting really worried about the U.S. budget,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Stocks are down along with most commodities, with the exception of safe havens such as gold.” The Standard & Poor’s GSCI Index of 24 raw materials tumbled 0.9 percent to 687.56, the lowest level in a week. Eighteen of the commodities declined, led by cotton, coffee, nickel and crude oil. The Standard & Poor’s 500 Index dropped 1.2 percent to 1,300.01 at 2:35 p.m. in New York, and the Dow Jones Industrial Average fell 141.83 points, or 1.1 percent, to 12,337.90. “We’re back to tracking the S&P 500,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “You have to wear highly restrictive blinders to miss the preponderance of bearish economic data or petroleum data. We have slowing growth, and we have weak demand numbers.” Total products supplied, a measure of fuel consumption, tumbled 3.7 percent to 18.5 million barrels a day in the week ended July 8, the biggest one-week drop since the seven days ended April 29, figures released by the Energy Department last week showed. Oil volume in electronic trading on the Nymex was 471,032 contracts as of 2:31 p.m. in New York. Volume totaled 579,738 contracts July 15, 14 percent below the average of the past three months. Open interest was 1.52 million contracts. To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net. To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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