Oil starts week by hitting lowest level in 2012

May 14, 2012 - 3:26 PM

NEW YORK (AP) — The price of oil fell to its low for the year on continued doubts about some European countries ability to pay off massive government debts.

Benchmark West Texas Intermediate crude lost $1.35 to end the day at $94.78 per barrel in New York. That's the lowest level since Dec. 19.

Brent crude, which helps set the price for oil imported by U.S. refineries, gave up $1.26 to finish at $111 per barrel in London. Brent was last this low at the end of January.

Oil declined as a leadership crisis in Greece raised doubts that it would comply with a eurozone-supported plan to get out of debt. Analysts see Greece as a test case for whether cash-strapped European nations can slash spending and improve their economies. Europe consumes 18 percent of the world's oil.

"You have to ask yourself who's next after the Greeks," said Gene McGillian, a broker and oil analyst at Tradition Energy. "What happens if Spain or other countries have similar troubles."

Oil prices have been declining for most of the past two weeks as European leaders wrestled the debt crisis. The U.S. also reported disappointing jobs growth and China's manufacturing industry grew at a slower pace.

As the world's economy appeared to slow down, major oil producing nations like Libya, Iraq and Saudi Arabia increased oil production, boosting supplies.

The decline in oil prices has helped make retail gasoline cheaper in the U.S. The national average fell by

less than a penny over the weekend to $3.727 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gasoline prices have declined on average by nearly 21 cents per gallon since peaking in early April.

In other futures trading, heating oil gave up 3.41 cents to end at $2.9295 per gallon while wholesale gasoline lost 4.18 cents to finish at $2.959 per gallon. Natural gas dropped 7.8 cents to finish at $2.431 per 1,000 cubic feet.

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