Crude Oil Declines on Concern Debt Crisis to Stall Recovery

Crude oil fell as European governments struggled to contain the region’s debt crisis, raising concern that it will slow the global economic recovery. Futures dropped as much as 2.5 percent as European Union finance ministers plan to meet today in Brussels to discuss sovereign debt. U.S. petroleum inventories climbed to the highest level in at least 20 years for the middle of May.

“The worry is that the European economy is going to drag the global economy into another recession,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, said in an interview. “Because 2008 is so fresh in everybody’s mind, everyone I talk to is just petrified.” Crude oil for July delivery dropped 78 cents, or 1.1 percent, to $70.02 a barrel at 10:35 a.m. on the New York Mercantile Exchange. The July contract has dropped for nine consecutive days, losing 13 percent since May 10. Prices are down 7.2 percent this week.

Oil prices plummeted almost $115 a barrel between July and December 2008. Supplies of oil and all petroleum based fuels jumped to 1.81 billion barrels in the week ended May 14, the highest stockpiles on a seasonal basis in Energy Department data through 1990. High inventories have driven down the profit margin from refining crude into gasoline and heating oil from a 15 month high. The crack spread for July has dropped 14 percent this week, based on Nymex futures prices.....Read the entire article.

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