Oil below $86 amid growing Europe debt crisis

[September 12, 2011]  SINGAPORE (AP) -- Oil prices fell to below $86 a barrel Monday in Asia as investor concern about Europe's debt crisis undermined confidence in equities and commodities.

Benchmark oil for October delivery was down $1.64 to $85.60 at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude fell $1.81 to finish at $87.24 on Friday.

In London, Brent crude for October delivery was down 96 cents at $111.81 on the ICE Futures exchange.

Traders are eyeing closely a possible Greek debt default. Greece's cash-strapped government said Sunday it would impose a new property tax in a bid to meet fiscal targets essential to maintaining a vital international bailout program.

The debt crisis has helped strengthen the U.S. dollar against the euro. A stronger dollar makes commodities such as oil more expensive for investors with other currencies.

"Markets need assurance that Greece's problems do not lead to another Lehman-style crisis," DBS bank said in a report. "EUR/USD is still considered a falling knife, and can still tumble towards the 1.30 level this month."

The euro dropped to $1.3521 on Monday from $1.3651 late Friday. Stock markets, which oil traders look to as a barometer of overall investor sentiment, fell in Asia on Monday.

"To many, Greece has been a persistent thorn increasing market volatility, an unproductive distraction to global efforts to sustain the world economic recovery," DBS said. "So much so that the idea of Greece exiting the euro is no longer considered a zero probability."

In other Nymex trading for October contracts, heating oil fell 2.4 cents at $2.96 per gallon and gasoline futures dropped 3.4 cents at $2.73 per gallon. Natural gas for October delivery slid 3.0 cents to $3.89 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

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