Oil slides as debt talks continue in US, Europe

July 20, 2011 - 12:14 PM

Oil prices are sticking around the same level they've been at since the beginning of the month, as talks continue over debt issues in Europe and the U.S. that could affect future demand.

Benchmark West Texas Intermediate crude for September delivery fell 57 cents to $97.28 a barrel in Wednesday afternoon trading on the New York Mercantile Exchange. The August contract, which is set to expire Wednesday, lost 52 cents at $96.98 a barrel. In London, Brent crude gained 28 cents at $117.34 per barrel on the ICE Futures exchange.

Crude prices have been mired in a narrow range between about $95 a barrel and $99 a barrel this month as investors worry that the global economy will suffer if U.S. and European leaders fail to solve their debt problems. That, in turn, could weaken demand for oil.

In the U.S. there appeared to be growing support for a bipartisan plan to reduce the deficit ahead of an Aug. 2 deadline to raise the nation's debt ceiling. Although it's seen as unlikely, failure to raise the debt ceiling would mean the U.S. would default on its massive debt obligations.

European leaders will meet on a plan to provide more financial aid for Greece, which teeters on the brink of default. Its debt problems threaten to spread to other troubled economies in Europe.

Oil investors are waiting for some clarity, taking their cue from movement in the dollar and stock markets, analysts say. After big gains on Tuesday, major indexes were down a little.

"There's just a lot of psychology in the market right now," energy analyst Jim Ritterbusch said. "We just have some nervous markets whether you're talking bond markets, stock markets, commodities markets. They're just waiting for definition regarding debt talks on both sides of the Atlantic."

Also on Wednesday the Energy Department said the nation's crude oil supplies fell more than analysts expected last week. Gasoline stockpiles rose, indicating ongoing tepid demand.

In other Nymex trading for August contracts, heating oil was virtually unchanged at $3.0944 per gallon, gasoline futures fell 1 cent to $3.1055 per gallon. Natural gas lost 2 cents at $4.490 per 1,000 cubic feet.