European Debt Causes Oil Prices Down

Oil dropped below $90 a barrel this week due to Europe's debt crisis hurting fuel consumption, and after an industry report showed US gasoline supplies surged the most since January.

Futures fell a second day as traders secured profits from a rally to $90.76 a barrel, the highest in 26 months, according to Bloomberg. The dollar strengthened after European ministers ruled out immediate aid for debt ridden Portugal and Spain, dulling investor appetite for commodities. The American Petroleum Institute said gasoline stockpiles increased 4.8 million barrels last week.

Crude, due for delivery in January dropped by as much as 1.2 percent, to $87.61 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $88.37 at 1:32 p.m. GMT. Brent crude for next month settlement fell as much as $1.12, or 1.2 percent, to $90.27 a barrel on the London based ICE Futures Europe exchange.

Christopher Bellew, senior broker at Bache Commodities Ltd in London said: "Oil is facing contradictory pressures. On the one hand it's being pumped up by Chinese demand and colder weather, while on the other relatively high supplies and economic anxieties are dragging it down."

Oil has risen 11 percent in 2010, on the back of a soaring market of 78 percent in 2009 and a 100 percent increase in 1999.

Oil's rally is unlikely to coax OPEC into raising production quotas at a meeting this week in Ecuador, as group members consider the global economic recovery strong enough to withstand price gains, according to a Bloomberg News survey.

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