NEW YORK — Oil prices retreated Monday as concerns grew about economic stability in Europe after Ireland sought billions of dollars in financial assistance from its neighbours.
Benchmark crude for January delivery fell 24 cents to settle at US$81.74 a barrel on the New York Mercantile Exchange. The price has dropped about five per cent from a week ago in the wake of Ireland’s debt crisis and China’s efforts to slow economic growth.
Ireland formally requested help Sunday from other countries in the European Union after a financial crisis developed with losses at three nationalized banks. Terms of the package from the European Union and the International Monetary Fund are being negotiated but should not exceed US$137 billion.
Ireland’s action follows a multibillion-dollar European bailout approved in May for Greece to prevent it from defaulting on its debt. Now, traders and investors are concerned that heavy debt burdens in Spain, Portugal and Italy may lead to other bailout packages, slower global economic recovery and weak demand for oil and gas. Some traders are selling contracts to reduce their risk ahead of the Thanksgiving holiday weekend.
Efforts by China to tighten its monetary policy, with things like higher bank reserve requirements, also weighed on energy prices. China’s rampant growth and thirst for energy have driven oil prices higher even as economies in the U.S. and Europe have been sluggish.
“Certainly things can unfold in the eurozone very quickly,” LaSalle Futures Group analyst Matt Zeman said. “Things can happen in China very quickly. Why take that risk home with you over the long weekend?,” he said, referring to the U.S. Thanksgiving weekend which begins Thursday.
Trading was light Monday, which can contribute to volatility in price swings. In addition, the U.S. dollar was stronger against most other currencies. Since oil and other commodities are priced in dollars, a stronger dollar makes them less of a bargain for traders using other currencies.
In other Nymex trading in December contracts, heating oil fell 0.58 of a cent to settle at US$2.2686 a gallon, gasoline lost 4.41 cents to settle at US$2.1519 a gallon. Natural gas added 10.7 cents to settle at $4.271 per 1,000 cubic feet.
In London, Brent crude lost 38 cents to settle at US$83.96 a barrel on the ICE Futures exchange.