Oil falls nearly 2 percent as euro weakens

By Edward McAllister

NEW YORK (BestGrowthStock) – Oil fell nearly 2 percent to below $73 per barrel in choppy trade on Tuesday as the euro slid and Chinese and European data raised concerns about the global economy.

The euro fell (Read more about the trembling euro. ) to a four-year low against the dollar on signs the euro zone’s debt crisis is spreading to its banking system. A stronger dollar weighed on crude, making it more expensive to those using other currencies.

U.S. equities were little changed. Wall Street erased losses following data showing U.S. manufacturing expanded for a 10th straight month, but investors remained fearful of a slowing economy. (.N: )

The front month July NYMEX crude contract fell $1.39 to settle at $72.58 a barrel. ICE Brent crude for July fell $1.94 to settle at $72.71 a barrel.

“Volatility is the central theme,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. “Crude hasn’t shown the strength to stay above $75. The market is waiting to see if the European contagion will spread.”

U.S. crude had no futures settlement price on Monday due to the U.S. Memorial Day holiday. The New York Mercantile Exchange will combine trading sessions for Monday and Tuesday into one.

“The euro pulled back from its highs and so did crude as they react to positive U.S. economic data and the earlier less positive data from China and Europe,” said Stephen Schork, president at the Schork Group in Villanova, Pennsylvania.

Manufacturing growth slowed across the globe in May as the pace of new orders eased and uncertainty grew over what damage Europe’s debt crisis might do to the fragile economic recovery.

China’s factories scaled back production last month and slowed the pace of hiring, the purchasing managers’ index (PMI) showed. Expansion of manufacturing activity in the euro zone also slowed sharply in May from the previous month, another survey showed.

“The figures point to slower economic growth toward the end of this year,” said Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt. “The fear is that Chinese officials will tighten monetary policy and this will also dampen growth.”

U.S. crude posted its biggest monthly loss since 2008 in May, losing almost 14 percent, after the European economic crisis raised the prospect of reduced fuel demand.

Analysts say future oil supply could be affected by restrictions on offshore drilling after the slick from BP’s (BP.L: ) stricken Gulf of Mexico well, the worst oil spill in U.S. history.

The disaster has led the U.S. government to stop issuing new exploratory drilling permits in deep water for six months and declare a ban that effectively idles operations of 33 deepwater exploratory rigs for the same period.

Stock Market Money

(Additional reporting by Robert Gibbons in New York, Christopher Johnson in London and Alejandro Barbajosa in Singapore; Editing by David Gregorio)

Oil falls nearly 2 percent as euro weakens