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Oil drops to US$91.66

Published:Wednesday | May 23, 2012 | 12:00 AM

Oil prices dropped near their lows for the year following warnings of a "severe recession" in Europe and an apparent easing of tensions over Iran's nuclear program.

Benchmark US crude on Tuesday lost 91 cents to end the day at US$91.66 per barrel in New York while Brent crude fell by 40 cents to end at US$108.41 per barrel in London.

Both contracts hit a low for 2012 on Friday at US$91.48 and US$107.14, respectively.

Oil has declined almost every day this month as elections in Greece and France threatened existing plans to fix the eurozone economy. A top economist for the Organization for Economic Cooperation and Development warned Tuesday that the eurozone could fall into recession this year if leaders fail to stimulate the economy.

Stunt growth

If that happens, it would stunt growth in world oil demand at a time when supplies are expanding.

Fears of a protracted standoff with Iran had helped push benchmark crude near US$110 per barrel in February. Prices have since fallen below levels of early November, when the United Nations first warned of a potential nuclear threat from Iran.

Uninterrupted Iranian exports could boost world oil supplies to an average of 89.15 million barrels per day, according to the latest projections from the Energy Information Administration. That would be more than enough to meet world demand.

In other futures trading, natural gas added 9.8 cents, up 4 per cent, to finish at US$2.707 per 1,000 cubic feet.

Natural gas prices have jumped by 42 per cent since hitting a 10-year low on April 19 as supplies declined.

Heating oil and wholesale gasolene were both flat, ending the day at US$2.8614 and US$2.937 per gallon, respectively.

- AP