Oil Prices Fall As Greece Debt Talks Continue

Published January 20, 2012 5:54PM (EST)

Oil prices fell Friday as Greece's debt negotiations sparked new concerns about Europe's financial problems.

Greece officials said that they are confident a deal will be reached with private creditors who are being asked help ease the country's debt load. An agreement is necessary for Greece to receive a new round of bailout money to prevent a default on its debt.

The talks are a key part of broader efforts to deal with Europe's financial crisis. There have been concerns that the crisis could affect the global economy and reduce demand for oil and other energy products.

Benchmark oil fell $1.62 to $98.92 per barrel Friday in New York. Brent crude fell $1.35 to $110.20 per barrel in London.

Investors also are monitoring Iran's threats to close the Strait of Hormuz in the Persian Gulf, if the U.S. and other countries impose more sanctions on Iran's nuclear program.

European Union foreign ministers are expected to discuss possible sanctions, including an oil embargo, against Iran at a Monday meeting. Many analysts doubt that Iran could attempt a blockade without swift military intervention from the U.S. but any supply shortages would cause oil inventories to tighten.

One-sixth of the world's seaborne oil passes through the narrow strait in the Persian Gulf.

Cameron Hanover analyst Peter Buetel said there is "a lot nervousness" among investors as events play out in other countries. "It just seems more than anything that the market's run out of upside momentum at this level," he said.

Meanwhile, U.S. retail gasoline prices continue to stay above year-ago levels even though demand is weak. On Friday the national average for gasoline was practically unchanged almost the same as a week ago at $3.38 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That's about 18 cents more than a month ago and around 27 cents more than a year ago.

In other trading, natural gas moved between small losses and gains, a day after the Energy Department said the nation's supplies remained plentiful and demand was weak as the mild winter continued across much of the nation. The price of natural gas is near a 10-year low. Natural gas rose a penny to $2.34 per 1,000 cubic feet in midday trading.

Heating oil fell 3 cents to $3 per gallon and gasoline futures fell 4 cents to $2.78 per gallon.


AP Energy Writer Chris Kahn contributed to this report.

By Salon Staff

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