Oil prices fall on concerns about European economy

Oil prices slide as European economy concerns outweigh brighter jobs report in US

Associated Press

NEW YORK (AP) -- Oil prices are falling as concerns about Europe outweigh positive U.S. employment numbers.

Benchmark crude fell by 53 cents to $101.31 per barrel in New York. Brent crude, which is used to price foreign oil varieties that are imported by American refineries, lost 24 cents at $112.50 per barrel in London.

Prices dropped as traders focused on European economic reports that showed weaker factory orders in Germany and soft European retail sales elsewhere in November.

"They threw a little bit of cold water onto the market," said Gene McGillian, a broker and analyst at Tradition Energy.

European countries are struggling to overcome huge government debts, and many economists expect Europe will fall back into recession this year and reduce demand for fuel.

Oil prices climbed briefly earlier in the day after the government said the U.S. unemployment rate dropped to 8.5 percent in December. Increased hiring boosts gasoline demand and pump prices as more workers return to the daily commute. The positive jobs report also pushed up the dollar against other major currencies like the euro. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.

Meanwhile gasoline pump prices rose more than 3 cents to a national average of $3.35 a gallon, according to AAA, Wright Express and Oil Price Information Service. Gasoline prices are at the highest level ever for this time of year. They have jumped by nearly 13 cents a gallon in the last two weeks.

Gasoline prices are rebounding after dropping so low last year that they made the refining business unprofitable. Motorists are still buying less gas than they did a year ago, but pump prices will rise as oil prices head higher, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

"It's difficult to raise prices when gasoline demand is so anemic," said Kloza. "But if wholesale gasoline prices go up, you have to pass it along" to the consumer.

Kloza expects the national pump price to average between $3.75 and $4.25 a gallon this year.

In other energy trading, heating oil rose 2 cents to $3.06 per gallon and gasoline futures rose by less than a penny to $2.74 per gallon. Natural gas rose by 6 cents to $3.04 per 1,000 cubic feet.

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