Crude Oil falls as Eurozone on debt worries, high US Gas prices supported by refinery issues

MS, VLO, XOM

Crude Oil futures retreated Monday, as concerns about the Eurozone’s debt crisis renewed fears over slowing.

WTI Light, sweet crude for November delivery fell 57 cents, or 0.6%, to 89.31 a bbl on the New York Merc. Brent crude on ICE Futures Europe fell 23 cents, or 0.2%, to 111.79 a bbl.

Futures declined for a second-straight session as a meeting of top euro-zone officials began in Luxembourg, with investors awaiting signs on how Europe will address Spain’s worsening financial crisis.

Europe’s troubles weigh on the Crude Oil market, as the continent’s financial crisis has curbed demand and raised fears the economic troubles could spread elsewhere.

The news helped boost the dollar against the euro, which also eroded oil prices by making the dollar-denominated commodity more expensive for holders of other currencies. The ICE Dollar Index recently rose 0.3% to 78.568.

Sunday, Iranian lawmakers criticized President Mahmoud Ahmadinejad over the decline of Iran’s currency and his handling of the economy. The Iranian president has been under fire from rivals for months over his failure to resolve the standoff between Tehran and the West over its nuclear program.

Investors are taking the move as a sign Western sanctions are working, lessening the odds of an imminent military strike by Israel or a broader conflict that could undermine crude-oil supplies.

Crude Oil prices have fallen about 3% this month, as the market’s focus has shifted back to concerns over slowing demand.

Weakness in the US, Europe and China the world’s biggest oil consumers have weighed on the market.

One source of upside for the market has been a series of recent refinery issues in the US, which has sent the price of gasoline North. In California, retail prices are closing in on $5+ a gal, although prices in the wholesale market fell Friday.

Last week, Valero Energy Corp. (NYSE:VLO), the biggest refiner in the US, said it would stop selling gasoline on the spot market. Exxon Mobil Corp. (NYSE:XOM) said it would allocate gasoline supplies to some West Coast distribution centers.

A commodity analyst at Morgan Stanley (NYSE:MS), described the refinery glitches as “one-off issues.”

“As refiners return from maintenance which peaks during the 3rd week of October, runs increase and conditions normalize,” the analyst wrote in a report Monday.

The differential between Brent crude and the benchmark Nymex contract widened to its highest level since October 2011.

Elevated inventories and surging production in the US have weighed on the domestic contract, and tensions elsewhere in the Middle East continue to support Brent.

The gap between the 2 contracts recently stood at more than 22 a bbl. Historically, the 2 contracts have traded almost together.

Front-month Nov re-formulated gasoline blendstock, or RBOB, recently fell 0.73 cent, or 0.2%, to 2.9452 a gal. Nov heating oil fell 0.15 cent to 3.1544 a gal.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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