Oil near $88 amid European financial turmoil

[May 31, 2012]  BANGKOK (AP) -- Oil prices lingered near $88 a barrel Thursday in Asia as a fresh wave of sour economic news from Europe lent weight to expectations that the region's slowdown will keep demand for crude subdued.

Benchmark oil for July delivery was up 28 cents to $88.10 per barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract slid $2.99 to close at $87.82 on the Nymex on Thursday.

In London, Brent crude was up 34 cents at $103.80 per barrel on the ICE Futures exchange.

Experts are concerned about a banking crisis in Europe that may pull countries that use the euro common currency into recession. Concerns mounted Wednesday, when the European Commission reported that economic confidence has plummeted this month to the lowest level in 2.5 years.

The grim outlook was further compounded by sharply higher borrowing rates for Spain and Italy. The yield on Spain's 10-year bonds, a key indicator of market confidence in the country's ability to continue to make payments on its debt, shot as high as 6.69 percent, the highest since the euro currency was launched in 2002.

Victor Shum, energy analyst at consultancy Purvin & Gertz in Singapore, said European troubles and weak demand were responsible for sliding oil prices.

"OPEC has been producing at record levels and North American crude production continues to boom so inventories are high," Shum said. "The weak macroeconomic news out of Europe and fears about all these debt troubles spreading to Spain and Italy, coupled with weak fundamentals, have caused the Nymex to break through $90 and we're still heading down today in Asia."

The euro fell near a two-year low against the dollar Wednesday, helping to push oil prices even lower. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude barrels more expensive for investors holding foreign money.

In other energy trading, heating oil was up 1 cent at $2.75 per gallon while gasoline futures fell 0.6 cents to $2.77 per gallon. Natural gas fell 3 cents at $2.39 per 1,000 cubic feet.

[Associated Press; By PAMELA SAMPSON]

Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.