Crude-oil futures finished below $94 for the first time in five months as European political turmoil dimmed prospects for economic growth.
Concerns about the European economy and rising global oil supplies have weighed on the market for more than a week and brought prices for Nymex crude to a fresh settlement low for the year--and the lowest level since December 2011.
Light, sweet crude for June delivery fell 80 cents, or 0.84%, to settle at $93.98 on the New York Mercantile Exchange. Meanwhile, June Brent futures gained 67 cents, or 0.6%, to $112.24 a barrel on the Intercontinental Exchange.
The euro zone did get optimistic news. The Germany's economy grew 0.5% in the first quarter, while in France, gross domestic product was flat following modest growth in the prior quarter.
The fact that both nations avoided the technical definition of recession--two consecutive quarters of negative growth--was enough to spur some buying in the morning, when prices reached to an intraday high of $94.56.
The rally was short lived. The Greek government called for another round of elections in an attempt to build a coalition government, adding greater uncertainty to the debt-plagued euro zone.
Leaders in Greece continue to work to piece together a deal aimed at avoiding default on current obligations, but doubts about their success has helped bring the euro to its lowest level against the U.S. dollar, $1.2735, since January.
"The question is whether the rest of the euro zone will drag down Germany, or will Germany bring up the euro zone," said market analyst Andrew Lipow of Lipow Oil Associates. "They are simply running out of money in most of the other countries."
Meanwhile, crude oil stocks in the U.S., the world's largest oil consumer, have reached a 22-year high, while Saudi Arabia, the biggest oil exporter, has increased production to 10 million barrels a day.
U.S. weekly oil data are expected to show crude-oil stockpiles rose again last week while refiners boosted operations. Thirteen analysts surveyed by Dow Jones Newswires expect U.S. crude-oil inventories rose by 1.4 million barrels in the week ended May 11. The closely watched government survey from the Energy Information Administration is due to be released at 10:30 a.m. EDT Wednesday.
Banks and other financial institutions are reviewing their risk exposure in the wake of last week's announcement from J.P. Morgan (JPM) that it lost $2 billion in what it called hedging, said Carl Larry, analyst at Oil Outlook. He adds many financial institutions already have cut back activity in the oil market amid expectations of another build up in supply.
"We're starting to see a lot of financial institutions take a step back and reevaluate where they are in the market," Larry said. "We're looking at another build (increase in inventories) tomorrow, and people are worried about that."
Reformulated gasoline blendstock futures for June delivery settled at $2.9441, down 0.5%.
June heating oil futures fell 3.41 cents to settle at $2.9330 a gallon, up 0.1%.
Copyright (c) 2012 Dow Jones & Company, Inc.
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