Oil falls on China, eurozone debt worries

July 12, 2011 | 08:16

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Oil prices dropped Monday, pressured by growing market concerns about the slowing Chinese economy and the eurozone debt crisis.

New York's main contract, light sweet crude for delivery in August, closed at $95.15 a barrel, a drop of $1.05 from Friday's finish.

In London, Brent North Sea crude for August delivery shed $1.09 to settle at $117.24 a barrel.

On Friday New York's benchmark West Texas Intermediate contract shed nearly $2.50 after the release of a dismal June jobs report in the United States, the world's biggest oil-consuming country. The US economy added few new jobs and the unemployment rate unexpectedly rose to 9.2 per cent.

"Not only are we seeing lowered demand expectations here in the United States but across the globe," said Phil Flynn, an energy analyst at PFGBEST.

China, the second-biggest oil consumer, reported Saturday its inflation rate accelerated in June to 6.4 per cent, the highest level in three years.

Some analysts are concerned Beijing might go too far in tightening monetary policy to curb overheating in the economy.

"That really worried the markets because oil demand growth is predominantly coming from emerging markets," said Matt Smith at Summit Energy.

"And we've got the follow-through from last Friday -- the (US) employment report -- and then we've also got this risk of sovereign debt spreading to Italy and Spain."

Bond yields for those two eurozone countries hit record highs Monday as investors worried that Italy and Spain could be the next to sink into Europe's spreading debt crisis.

AFP

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