Benchmark crude falls US$1 to US$92.19/barrel; Brent loses US$0.02 to US$109.54/barrel; gasoline rises US$0.0187 to US$2.6244/gallon; natural gas falls US$0.15 US$3.781/mcf

Cindy Allen

Cindy Allen

Nov 1, 2011 – Associated Press

NEW YORK , November 1, 2011 () – Oil dropped Tuesday with the stock market as a surprise call for a referendum in Greece threatened to derail a plan to bolster Europe's banks.

Benchmark crude fell $1 to end the day at $92.19 per barrel in New York, while Brent crude lost 2 cents to finish at $109.54 in London.

The benchmark price dropped more than 4 percent, to $89.17 a barrel, after Greece's prime minister called a referendum in his country on Europe's debt deal. If Greeks reject the deal, it would increase the chances of default. That would weaken banks in surrounding countries and slow down the European economy.

Oil prices recovered as some analysts wondered if the referendum, set for January, would happen at all. The prime minister faces a no-confidence vote Friday and some members of his own party have turned against him.

Anxiety about Europe and the global economy hit Wall Street as well. Stocks sold off, with the major indexes down about 2 percent.

Oil prices have wavered for months as European leaders worked to keep Greece's credit troubles from spreading. Europe is among the world's largest oil consumers, but investors are more concerned with the possibility that a meltdown in the European banking system could spread overseas.

Widespread bank failures could stifle corporate spending and act as a drag on the world economy. MF Global, a U.S. securities firm run by former New Jersey Gov. Jon Corzine, filed for bankruptcy Monday after making big bets on European debt that went sour.

"There are a lot of rumors about other companies having similar troubles" as MF Global, said Addison Armstrong, director of market research at Tradition Energy.

Meanwhile, a private survey showed that U.S. manufacturing grew last month, but at a slower pace than in September. Manufacturing activity has grown for 27 straight months, according to the Institute for Supply Management. The September reading indicated that factories are struggling to expand in a weak economy.

Construction spending also rose slightly in September. At $787.2 billion, it's barely half of what economists consider healthy.

MasterCard SpendingPulse reported that for the past eight months, U.S. drivers have bought less gasoline than a year ago. It estimated that drivers bought 2.6 billion gallons of gasoline last week, down 2.8 percent from the same week last year.

U.S. retail gasoline prices fell less than a penny on Tuesday to a national average of $3.437 per gallon, according to AAA, Wright Express and Oil Price Information Service.

In other energy trading, heating oil fell 2.04 cents to finish at $3.0379 per gallon. Gasoline futures rose 1.87 cents to end at $2.6244 per gallon. Natural gas fell 15 cents to finish at $3.781 per 1,000 cubic feet.

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