Oil falls on economic worry, but ends month higher

By Robert Gibbons

NEW YORK (BestGrowthStock) – Oil fell on Tuesday as concerns that Europe’s debt crisis will widen battered the euro and added to ongoing concerns about China’s economic growth.

Front-month December U.S. heating oil and gasoline futures slumped as those contracts expired and went off the board, also weighing on crude. On Monday, cold weather boosted distillates and tight New York Harbor supplies lifted gasoline, helping boost crude prices post a 2 percent gain.

U.S. crude oil for January delivery fell $1.62, or 1.89 percent, to settle at $84.11 a barrel, but dropped as low as $83.55 in post-settlement Globex trading.

But U.S. oil finished November up 3.29 percent from October, a third consecutive monthly gain and the biggest since September, when front-month crude jumped 11.2 percent.

Total U.S. crude trading volume on Tuesday was an unofficial 493,803 lots, down from Monday’s 539,097 and 20 percent below the 30-day average according to Reuters data.

In London, ICE January Brent crude fell $1.42 to settle at $85.92 a barrel.

“Crude sold off mainly on the concerns about the euro zone economy and the Shanghai index slipping didn’t help,” said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.

The dollar index (Read more about the global trade. ) (.DXY: ) against a basket of currencies reached a more than two-month peak as the euro tumbled on continuing fears that Ireland’s bailout might not help keep Europe’s debt problems contained. (USD/: )

Converting prices to euros, Brent reached its highest level for almost seven months on Tuesday, climbing above 67 euros per barrel.

Robert Montefusco at Sucden Financial in London said the weakness of the euro was putting increased pressure on oil.

“That puts pressure on the fundamentals,” Montefusco said. “Fear of contagion with not only Portugal and Spain, but now with France and Belgium in focus as well.”

Oil and dollar-denominated commodities often move inversely to the dollar. A stronger dollar typically pressures oil prices as it boosts the value of greenbacks paid to producers while making it more expensive for consumers with other currencies.

China’s key Shanghai stock index (.SSEC: ) closed at a seven-week low, with a shortfall of cash in the domestic money market creating a liquidity squeeze.

After recent moves to raise banks’ mandated reserve requirements, investors have been wary of further tightening measures by the No. 2 oil consumer as China tries to cool inflation and brake energy demand growth.

Factories in Japan and South Korea, Asia’s second- and fourth-largest oil users, cut output in October, in a region oil producers look to for demand growth.

U.S. economic data was mixed, with reports showing November consumer confidence at a five-month high and Midwest business activity growing faster than expected helping oil bounce earlier on Tuesday, even as a report on falling home prices disappointed.

U.S. OIL INVENTORIES

Industry group the American Petroleum Institute’s weekly report released late on Tuesday said crude stocks fell 1.1 million barrels in the week to November 26. (API/S: )

Gasoline stocks rose 1.1 million barrels and distillate stocks also posted a slight gain, up 224,000 barrels.

U.S. crude oil inventories were expected to have fallen 900,000 barrels last week as imports dipped, a Reuters analyst survey on Tuesday showed. Gasoline stocks were expected to be up 400,000 barrels and distillate stockpiles down 1.1 million barrels. (EIA/S: )

Crude futures prices were little changed by the release.

The U.S. Energy Information Administration’s inventory report is due at 10:30 a.m. EST on Wednesday.

(Additional reporting by Gene Ramos in New York, Christopher Johnson and Jonathan Gleave in London and Alejandro Barbajosa in Singapore)

Oil falls on economic worry, but ends month higher