Oil falls to below $92 in Europe as US dollar rises, euro battered by Greek crisis

Oil prices fell to below $92 a barrel Monday as Greece’s deepening financial crisis continued to reverberate around markets.

By early afternoon in Europe, benchmark oil for July delivery was down $1.09 to $91.92 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.94, or 2 per cent, to settle at $93.01 on Friday.

In London, Brent crude for August delivery was down $1.45 to $111.76 a barrel on the ICE Futures exchange.

A strengthening U.S. dollar has helped drag crude down from almost $115 early last month. A rising dollar makes commodities such as oil more expensive for investors with other currencies.

Talks between eurozone finance chiefs on Greece’s troubled finances ended early Monday without the ministers signing off on a vital instalment of rescue loans needed to avoid bankruptcy next month.

“An expected short-term agreement will likely enable markets to breathe a little easier and allow commodity complexes to stage a respectable bounce on account of a stronger euro,” said Edward Meir of MF Global in New York.

The euro fell to $1.4243 on Monday from $1.4307 late Friday.

If the euro drops below $1.40, crude will likely fall to below $90, energy consultant The Schork Group said.

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While U.S. crude demand continues to slip – driven miles fell 2.4 per cent on the year in April – analysts said the climbing use of fossil fuels for electricity generation in Japan, the world’s third largest consumer of oil, would help sustain prices.

“Japan’s higher oil demand should also prevent a further fall in oil prices,” said analysts at Commerzbank in Frankfurt, citing data showing that Japan’s crude imports rose an annual 6.9 per cent in May.

In other Nymex trading in July contracts, heating oil fell 3.54 cents to $2.9479 a gallon while gasoline dropped 3.67 cents at $2.9093 a gallon. Natural gas futures slid 2.3 cents at $4.302 per 1,000 cubic feet.

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Alex Kennedy in Singapore contributed to this report.

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