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Oil Prices Sink on Weak Outlook

NEW YORK ( TheStreet) -- Crude oil prices settled in negative territory Tuesday as worries about a weakening economic recovery in the U.S. and troubles in Europe took precedence over the passage of a debt ceiling deal that would help the country avert a default.

West Texas Intermediate light sweet crude oil for September delivery shed $1.10 to settle at $93.79 a barrel, while Brent crude oil futures for September delivery fell 25 cents to $116.56.


"After all of the furor and debate surrounding the debt ceiling in the last few weeks, the passing of a bill in Congress last night with one day to spare has been met by a whimper from the crude complex, as economic concerns dominate sentiment instead," said Summit Energy analyst Matt Smith.

The Commerce Department reported on Tuesday that personal spending decreased for the first time since September 2009, dampening hopes for robust growth going into the summer. The Commerce Department reported that personal spending for June decreased by 0.2%, after a revised 0.1% increase in May.

This comes on the heels of poor manufacturing data released by both the U.S. and China the day before.

Meanwhile, European debt woes were back in the spotlight, with Italy and Spain's weakened economies back in focus after President Obama signed legislation passed by the Senate on Tuesday afternoon by a vote of 74 to 26 to increase the nation's $14.3 trillion debt ceiling. The House of Representatives had approved the same bill Monday night 269 to 161.

The American Petroleum Institute is expected to release its weekly crude oil inventory report at 4:30 p.m. ET on Tuesday, and the Energy Information Administration is scheduled to release its report at 10:30 a.m. ET Wednesday. A 2 million-barrel build is expected, according to analysts polled by Platts.

"Traders will try to find solace in this week's [Department of Energy] statistics, but they might not find any. The picture is starting to become more bearish, with the economy looking quite weak," said Cameron Hanover analysts.

Natural gas futures for September delivery fell 3 cents to settle at $4.155 per million British thermal units as supply concerns stemming from the formation of Tropical Storm Don faded, and temperatures began to moderate.

Under 1% of Gulf of Mexico natural gas production stays shut after the storm, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.

A Cameron Hanover report says temperatures in the Texas-Kansas mid-continent corridor are forecast to be hot, but readings will likely be more moderate in the Great Lakes and along the East Coast.

"There is nothing out there that suggests we will see a repeat of the brutally hot weather across most of the country that we had two weeks ago."

Oil and gas stocks were retreating. Marathon Oil (MRO - Get Report) was tumbling 3.9% to $29.46; Occidental Petroleum (OXY - Get Report) was losing 2.3% to $95.57; Eni S.p.A. (E) was falling 1.4% to $41.53; Petroleo Brasileiro (PBR - Get Report) was retreating 2.2% to $33.41; Piedmont Natural Gas (PNY - Get Report) was slumping 0.7% to $29.07; Gas Natural (EGAS - Get Report) was shrugging off 1.4% to $11.13; and Northwest Natural Gas (NWN - Get Report) was trading sideways at $44.46.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.
Copyright 2011 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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