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Oil rocked by concerns over Spanish banking sector

May 30, 2012|By Ronald D. White
  • Traders working the oil options pit at the New York Mercantile Exchange. Oil dropped to its lowest levels since October as fears grew about the costs of propping up Spain's fragile banking sector.
Traders working the oil options pit at the New York Mercantile Exchange.… (Richard Drew / Associated…)

Crude oil prices dropped below $89 a barrel as the Euro dropped to its lowest levels in nearly two years. Both were pulled down by concerns about the costs of rescuing Spain's fragile banking sector.

Light sweet crude futures for July delivery were down $2.45, at $88.31 a barrel during early trading on the New York Mercantile Exchange. If it stays at that level, analysts said this would be the lowest close for U.S. oil since Oct. 21, when it closed at $87.40 a barrel.

"Oil has dropped into risk averse mode again," said Phil Flynn, an energy analyst with PFGBest Research in Chicago. "Concerns about the Euro zone are continuing to dominate the marketplace. There are fears that this could really slow down demand for oil."

In London, Brent North Sea crude prices were also shaken, falling $2.33 a barrel to their lowest levels in five months, at $104.35 on the ICE Futures Europe Exchange

Another factor in the drop in oil was speculation among traders that U.S. oil supplies have continued to rise from new domestic production.

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