Oil above $85 as Spain gets funds to rescue banks

[June 11, 2012]  SINGAPORE (AP) -- Oil jumped above $85 a barrel Monday in Asia after Europe offered Spain a $125 billion rescue loan for its troubled banks.

Benchmark oil for July delivery was up $1.25 to $85.35 per barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 72 cents to settle at $84.10 in New York on Friday.

In London, Brent crude for July delivery was up 93 cents at $100.40 per barrel on the ICE Futures exchange.

Over the weekend, the 17 countries that use the euro common currency pledged to lend Spain funds to bailout out its faltering banks. Oil has dropped from $106 last month as Spain's banking crisis threatened to worsen Europe's economic slowdown, which would weaken demand for crude.

The financial lifeline for Spain helped strengthen the euro to $1.2610 from $1.2507 late Friday in New York. A weaker dollar makes commodities priced in dollars less expensive for investors with other currencies.

"Over the last three months we have seen a significant reemergence of the link between the euro and oil prices," energy trader and consultant The Schork Group said in a report. "Thus, strength in the euro likely means support for oil prices."

A warning from Iran that negotiations over its nuclear program could stall also helped raise oil prices. Ali Bagheri, Iran's No. 2 nuclear negotiator, said Western powers must explain what concessions they will offer to Iran in return for a halt to upgrading enriched uranium to weapons grade, according to official IRNA news agency Sunday.

Iran and six world powers are scheduled for talks in Moscow on June 18.

Iran says it is developing a nuclear program for peaceful purposes. In exchange for discussing enrichment, Iran wants the West to ease sanctions which have made exporting its crude more difficult.

In other energy trading, heating oil was up 3.3 cents at $2.71 per gallon while gasoline futures rose 3.2 cents at $2.72 per gallon. Natural gas slid 4.3 cents at $2.26 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

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