Oil falls, pressured by Spain, euro zone worries

Mon Jul 23, 2012 4:06pm EDT
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By Robert Gibbons

NEW YORK (Reuters) - Oil prices fell sharply on Monday, down a second straight day, as worries that Spain is headed for a bailout and the euro zone debt crisis is spreading prompted investors to sell assets perceived as risky, boosting the dollar and U.S. debt.

Brent fell more than 3 percent and U.S. crude fell 4 percent, with both posting their biggest one-day percentage losses since June 21, after Spain's central bank said that country's economy sank deeper into recession in the second quarter.

Friday's announcement by Spain's Valencia region that it would need help from Madrid was followed by weekend reports that Murcia appeared on course to ask for assistance.

"There are fears this could be the beginning of a domino effect, which ultimately leads to Spain having to join Greece, Portugal and Ireland in asking for an official rescue," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt.

Crude prices hit eight-week highs on Thursday, then eased on Friday as concerns about Spain heightened.

Brent September crude fell $3.57 to settle at $103.26 a barrel, having fallen as low as $102.42 intraday.

Following Friday's August contract expiration, U.S. September crude fell $3.69 to settle at $88.14 a barrel, having dropped as low as $87.94 intraday.

Brent and U.S. crude last week posted weekly gains of more than 4 percent, even with Friday's losses, as violence in Syria, tensions between Iran and the West, and North Sea production disruptions provided lift for oil prices.   Continued...

An employee holds a gas pump at a gas station of Hyundai Oilbank in Seoul June 15, 2012. REUTERS/Choi Dae-woong