Oil Down To Near $98 On Greek Bailout Uncertainty

PABLO GORONDI

Oil prices fell to near $98 a barrel Friday as encouraging news about the U.S. economy was overshadowed by European demands for Greece to make further spending cuts before getting a new bailout.

By early afternoon in Europe, benchmark crude for March delivery was down $1.67 to $98.17 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.13 to settle at $99.84 on Thursday.

In London, Brent crude was down $1.90 to $116.69 a barrel on the ICE Futures exchange.

Crude has bobbed around $100 for the last few months, buoyed by signs the U.S. economy is improving. On Thursday, the U.S. reported that the number of Americans seeking unemployment benefits fell to near a four-year low last week, suggesting the job market is gaining strength.

"The energy market appears positioned for additional price gains as we still look for crude to work its way up to the $101 area," energy consultant Ritterbusch and Associates said in a report.

Oil has risen from $96 earlier this month on growing investor optimism Greece may avoid a chaotic debt default. Greece agreed Thursday to new spending cuts and other austerity measures necessary to receive an international bailout.

Hours later, however, European ministers said Greece didn't go far enough and demanded additional cuts of euro325 million ($430 million) within a week in exchange for a euro130 billion ($170 billion) bailout to stave off bankruptcy.

Analysts at Sucden Financial in London said the "volatile nature" of the negotiations concerning the Greek bailout were a source of uncertainty for investors.

"(Thursday's) Greek deal optimism seems premature," Sucden Financial said in a research note. "Further, a weaker euro is helping to soften risk appetite and pressure crude prices as European equities are also tracking lower."

Gains by the dollar make crude priced in dollars more expensive for investors trading in other currencies and usually pulls oil prices lower. On Friday, the euro was down to $1.3193 from $1.3290 late Thursday in New York.