Spain worries halt rising oil prices

Oil prices steadied Friday after an upwards drive was reversed by renewed concerns about the health of Europe’s economy.

News that Fitch Ratings had downgraded the sovereign debt of Spain to AA+ from its top AAA rating sent oil prices into retreat.

“The prices clearly began falling when Fitch lowered the ratings on Spain sovereign debt,” said Andy Lipow, of Lipow Oil Associates.

“When I translate that into the effect on the oil market I come to the conclusion that it will impact the oil demand.

“The economy will take much longer to recover,” he said.

New York’s main contract, light sweet crude for delivery in July, was down 58 cents at 73.97 dollars a barrel, after a brief foray above 75 dollars a barrel.

Brent North Sea crude for July dipped 64 cents to 74.02 dollars.

Oil prices had been rallying since Wednesday, with sentiment lifted by recovering stock markets and fresh data pointing to a sustained economic recovery in the key US energy market.

A report by the US Department of Energy showed an unexpected dip in US gasoline (petrol) supplies of 200,000 barrels. Distillate stocks, including diesel and heating oil, fell 300,000 barrels in the week ending May 21.

But there was some market malaise caused by the unfolding environmental disaster in the Gulf of Mexico.

US President Barack Obama headed to Louisiana to view the oil spill response amid suspense over the latest bid to cap the massive leak in the Gulf of Mexico.

Obama was to spend just over three hours in the region, surveying efforts to cap and clean up the disastrous spill on his second visit to the state, a day after he pledged not to rest until the crisis was dealt with.

“My job is to get this fixed,” a visibly angered Obama said Thursday at his first formal White House press conference in 10 months, called specifically to address the spill.

But while initial indications were positive from BP’s latest attempt to plug the leak, a so-called “top kill” process that floods the leak with heavy drilling fluid, the firm warned it would be days before the results were clear. burs-arb/pp