Oil drops near 7-week low on European crisis

Oil drops near 7-week low on European crisis

Dallas: Oil fell to the lowest level in almost seven weeks in New York on bets that Europe’s sovereign debt crisis may worsen, crimping growth and fuel demand, and as sales of new US homes dropped to a six-month low in August.

Futures tumbled as much as 3.4% as the euro dropped to the lowest level since January against the dollar and commodities declined on concern the European crisis could trigger another recession. Earlier, prices rose on speculation that the European Central Bank may alleviate the crisis.

“People are scared," said Phil Flynn, vice-president for research at PFGBest in Chicago. “Oil is acting weak right now but if the European situation gets settled, I think oil will go back up. The housing numbers were weak. We were trying to get optimistic and then were blinded by a bad economic number."

Crude for November delivery dropped $1.35, or 1.7%, to $78.50 a barrel at 10.38am on the New York Mercantile Exchange. It touched $77.11 a barrel in intra-day trading, the lowest price since 9 August. Oil has fallen 14% this year.

Brent futures for November settlement fell 81 cents, or 0.8%, to $103.16 a barrel on the London-based ICE Futures Europe exchange.

The euro dropped 0.4% to $1.3447 at 10.39am in New York. Earlier, it touched $1.3363, the lowest level since 18 January.