Oil near $99 in Asia amid Europe debt jitters

January 16, 2012 - 1:35 AM

KUALA LUMPUR, Malaysia (AP) — Oil prices edged up near $99 a barrel in Asia on Monday amid concerns that tensions in the Middle East would hurt crude supply but gains are tempered by jitters over Europe's ratings downgrade.

Benchmark crude for February delivery rose 18 cents to $98.88 a barrel at midday Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract fell 40 cents to settle at $98.70 in New York on Friday.

Natalie Robertson, commodities analyst with ANZ Banking Group in Melbourne, said fears of supply disruption amid ongoing tension over Iran's nuclear program and a crippling nationwide strike in Nigeria supported crude prices but trade was subdued by headwinds from the declining debt crisis in Europe.

"The oil market is a bit mixed at the moment given all the uncertainties coming out of the Middle East as well as escalating issues in Europe," she said.

Standard & Poor's downgraded the government debt of nine eurozone countries including France, Austria, Italy and Spain, making it harder for the European Union to raise funds to overcome massive debts. Germany's rating remained at the coveted AAA level.

A recession appears likely in Europe, and huge spending cuts will likely reduce European energy demand this year.

Robertson said there was a downward bias for crude prices given soft demand and weak sentiment in Europe but forecast a floor of $95 a barrel before sentiment improves in the second half of the year.

In other energy trading, heating oil fell 0.75 cents to $3.0466 per gallon, while gasoline futures rose 1.83 cent at $2.7496 per gallon. Natural gas fell 13.3 cents to $2.5647 per 1,000 cubic feet.