Oil hovers above $97 amid global economy fears

[June 14, 2011]  SINGAPORE (AP) -- Oil prices hovered above $97 a barrel Tuesday in Asia amid concern a weakening global economy is undermining crude demand.

Benchmark oil for July delivery was up 30 cents to $97.60 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract dropped $1.99 to settle at $97.30 on Monday following a fall of $2.64 on Friday.

In London, Brent crude for July delivery was up 34 cents to $118.75 a barrel on the ICE Futures exchange.

On Monday, Standard & Poor's cut Greece's credit rating deeper into junk territory Monday, saying the country is likely to default on its massive debts at least once by 2013. Investors are worried a disorderly restructuring of Greek debt could spark panic in the global bond market and torpedo a fragile global recovery.

"Greece continues to be a dark hole into which hopes for economic recovery get lost," energy consultant Cameron Hanover said in a report. "At the heart of the (oil price) weakness was the continuing fear that the global recovery may be losing steam and traction."

"Almost every day, there is some fresh economic data that seems to fit better in an anemic recovery than in one that is robust or dynamic."China said Tuesday that its inflation rate rose to 5.5 percent in May, the highest in nearly three years, while industrial production last month jumped 13.3 percent. U.S. retail sales are scheduled to be released later Tuesday.

Some analysts expect crude prices to fall over the next few months as political upheaval in the Middle East and North Africa eases. Brent will likely drop to between $105 and $110 at the end of this year, said David Carbon, head of economic research at DBS bank in Singapore.

In other Nymex trading in July contracts, heating oil up 1 cent at $3.12 a gallon while gasoline gained 2.2 cents at $3.02 a gallon. Natural gas futures were steady at $4.65 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.