NEW YORK — Oil slipped Tuesday on fears that the U.S. and Europe are headed for a prolonged economic slump.
Benchmark West Texas Intermediate crude lost 43 cents to settle at $86.02 a barrel in New York.
That was well off the lows for the day. After tumbling to US$83.20, the U.S. benchmark crude recovered as traders boosted the price of other oil varieties, including Brent crude, because international supplies remain tight.
Brent crude added $2.81, or 2.6 per cent, to $112.89 in London.
Still, analysts said, investors continue to be spooked by a steady drumbeat of disappointing economic news. The economy is struggling to grow. And the brinkmanship in Congress over the federal debt limit and last month’s first-ever downgrade of U.S. debt have raised concerns about Washington’s ability to fix its financial problems.
“It’s going to be a nerve-racking 12 months,” analyst and trader Stephen Schork said. “A lot of people are just trying to get their bearings.”
Cameron Hanover analyst Peter Beutel said investors are waiting for President Barack Obama and the Federal Reserve to explain how they’ll stimulate the economy and create jobs.
With the unemployment rate hovering at 9.1 per cent, “it will take something major from the White House or from the Fed to turn this around,” Beutel said.
Earlier this year, economists predicted that a rebounding global economy would push world oil demand to record levels in 2011. Now, analysts aren’t so certain.
China and other developing countries are still going to drive oil demand. But they won’t grow as fast if consumers in the U.S. and Europe cut back on purchases of clothing, toys, electronics and other goods that are made in the developing world.
“Oil demand both domestically and globally will fall short of most expectations during the current second half of 2011,” independent analyst Jim Ritterbusch said.
In other trading, heating oil added 1.28 cents to US$3.0102 a U.S. gallon (3.79 litres) and gasoline futures dropped 1.7 cents to US$2.8226 a gallon. Natural gas added 6.6 cents to US$3.938 per 1,000 cubic feet.