Oil prices fall from five-month high over euro crisis

CRUDE oil prices fell from a five-month high yesterday, as Spain's borrowing costs surged, heightening concern that Europe's debt crisis is spreading and will hurt demand.Futures fell as much as 1.1 per cent after Spain sold 3.56 billion euros ($4.8 billion) of a new 10-year benchmark bond at an average yield of almost seven per cent, the most since the euro's creation.Crude for December delivery fell as much as $1.13 to $101.46 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.50 at 11:56 a.m. London time. Earlier it reached $103.37, the highest price since May 31. Prices have gained 11 per cent this year, after increasing 15 per cent in 2010.Brent oil for January settlement on the London-based ICE Futures Europe exchange was down $2.06, or 1.8 per cent, at $109.82 a barrel. The European contract was $8.36 higher than West Texas Intermediate crude. The premium narrowed earlier to as little as $7.90, the least since March 9, and is down 70 per cent from its October 14 record-high settlement of $27.88.Oil surged yesterday, after the Energy Department said U.S. crude stockpiles declined for a second week and Enbridge Inc. said it will reverse the direction of the Seaway pipeline, adding an outlet to transport from the central U.S. and Canada to the coast of the Gulf of Mexico.'We expect the euro zone to get into recession next year,' said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, who expects the price of Brent to slip to $100 a barrel by the end of the year. 'I don't think prices fully reflect the weakening outlook for Europe. There's still some geopolitical fears priced in with Brent at $112.'Enbridge and Enterprise Products Partners LP, the other owner of the 500-mile (800-kilometer) Seaway pipeline, will reverse the north-flowing line that extends from Houston-area refineries on the Gulf of Mexico to Cushing, Oklahoma.
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