U.S. oil ends at 3-month low on euro zone woes

By Robert Gibbons and Gene Ramos

NEW YORK (BestGrowthStock) – U.S. crude oil futures fell more than 3 percent to a three-month low on Friday, dropping for a fourth straight session as concerns the European debt crisis will curb energy demand growth weighed on prices already under pressure from swollen U.S. oil inventories.

The euro plunged to an 18-month low against the dollar as investors worried that spending cuts mandated by an emergency bailout may choke off recovery in the 16-country euro zone. (USD/: )

U.S. stocks (Read more about the stock market today. ) fell on Friday on a combination of weak earnings from retailers, Senate backing for limits on credit card fees and concerns about Europe’s debt problems, though the major indexes finished up on the week. (.N: )

“Crude futures are down as people are realizing that the euro zone debt troubles may not only be regional in scope but global as well and that could harm world economic growth,” said Rich Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

U.S. crude for June delivery fell $2.79, or 3.75 percent, to settle at $71.61 a barrel, the lowest close since ending at $71.19 on February 5. Friday’s intraday low of $70.83 was the lowest price for a front-month contract since prices fell to $70.77 on February 8.

For the week, June crude fell $3.50, or 4.7 percent. The two-week tumble of $14.54, or 16.9 percent, was the biggest two-week percentage loss since the period ending January 16, 2009, during which front-month crude prices fell 21 percent.

Volatility is expected to remain a feature ahead of Monday’s June crude options expiration and the May 20 June crude contract expiration.

ICE Brent June futures fell $1.93 to settle at $77.18 a barrel on the day the contract expired.

Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the U.S. contract’s West Texas Intermediate benchmark crude, have risen the last eight weeks to a record 37 million barrels, pushing front-month U.S. crude down relative to both more distant futures contracts and the alternative global crude benchmark, Brent.

The front-month U.S. crude contract’s deficit to the next month’s contract, known as a contango, narrowed on Friday and at settlement was at $3.82, after ending at $4.59 on Thursday.

The June Brent contract’s Friday price slump at expiration narrowed its premium to the U.S. contract to $5.57 at settlement, from $5.71 on Thursday. The premium hit $6.57 on Thursday, the widest in 15 months, but only reached $6.27 intraday on Friday.

“The specter of large crude oil inventories seems to be weighing on markets much more than before, and has been instrumental in pressuring prices, widening the contangos and contributing to Brent’s expanding premium over WTI,” said Edward Meir of MF Global.

The International Energy Agency this week trimmed its 2010 global oil demand forecast by 50,000 barrels per day to 1.62 million bpd. The IEA said the Greek debt crisis could dent oil consumption if it spreads to other countries such as Spain, Portugal and Italy. (IEA/M: )

This contrasted with the raised 2010 demand growth forecasts from the Organization of the Petroleum Exporting Countries and U.S. Energy Information Administration.

On Monday, oil rose sharply following the announcement of a rescue package of almost $1 trillion, led by the European Union and the International Monetary Fund, for debt-laden European economies. It slumped the next four sessions.

Money managers cut net crude oil long positions on the New York Mercantile Exchange in the week to May 11, U.S. Commodity Futures Trading Commission data showed on Friday.

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(Additional reporting by Emma Farge in London, Alejandro Barbajosa in Singapore)

U.S. oil ends at 3-month low on euro zone woes