Oil prices fall ahead of eurozone meeting

Oil prices dropped to near $80 a barrel Thursday as markets awaited a meeting between Europe's leaders menat  to find solution's to the region's debt crisis. Benchmark oil prices were down 17 cents to $80.04 per barrel.

Danny Johnston/AP
Diesel fuel is pumped into a 500 gallon tank to power a water pump at an irrigation station next to a corn field near Tucker, Ark., Wednesday, June 27, 2012. Oil prices fell to near $80 per barrel Thursday ahead of a meeting between EU leaders to discuss the eurozone debt crisis.

Oil slipped to near $80 a barrel Thursday as markets remained on edge ahead of a meeting of European Union leaders that's meant to find solutions to the eurozone's debt crisis.

By early afternoon in Europe, benchmark oil for August delivery was down 17 cents at $80.04 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 85 cents to settle at $80.21 in New York on Wednesday.

In London, Brent crude for August delivery was down 49 cents at $92.01 per barrel on the ICE Futures exchange.

Expectations for the two-day EU summit beginning Thursday are low, especially as hopes for a deal on the joint issue of eurobonds faded following recent comments from German Chancellor Angela Merkel. In a raft of comments this week, Merkel has reiterated her opposition to the idea that is backed by the likes of France, Italy and Spain.

"Should the summit of European leaders come up with decisive measures (which is unlikely) or at least manage to calm the markets for a while ... we could see crude prices rebound further rather soon, as these are set to tighten in the second half of the year due to seasonally increasing demand," said a report from JBC Energy in Vienna.

Oil prices received some support from signs the U.S. economy, the world's largest crude consumer, may be improving.

On Wednesday, the U.S. said durable goods orders rose by 1.1 percent in May, reversing a two-month drop. Pending home sales also jumped in May.

Crude has plummeted from $106 early last month on expectations weak global economic growth will drag down oil demand. Some analysts expect crude to hover near $80 until U.S. demand picks up.

Signs of a weakening Chinese economy have also dragged oil prices lower. Citigroup estimates China will account for about half of global oil consumption growth this year.

"While Europe concerns impact all asset markets, the slowdown in China is particularly daunting for commodities," Citigroup said in a report.

However, the recent drop in fuel costs should help Asian economies by easing inflation pressures and giving policymakers more room for fiscal and monetary stimulus measures.

"In general, cheaper oil is in itself a good thing for Asia," Capital Economics said in a report. "The trouble is that oil prices are falling because the global economy is getting weaker. This means that instead of pushing up Asian growth, lower oil prices will only cushion the downside."

In other energy trading, heating oil was down 1.22 cents at $2.5780 per gallon while gasoline futures slid 0.84 cent at $2.4905 per gallon. Natural gas added 2.6 cents at $2.824 per 1,000 cubic feet.

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