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Crude Oil Falls on European Divisions, Fed’s Report of ‘Modest’ Growth

20 Oct 2011

Crude oil fell from a one-month high after a split emerged between France and Germany on proposals to increase the European bailout fund and the Federal Reserve described the pace of U.S. economic growth as “modest.”

Futures dropped 2.5 percent as euro-area leaders assembled in Frankfurt seeking to narrow divisions before a summit. The Fed said in its Beige Book survey that companies reported more doubt about the strength of the recovery. U.S. fuel use declined 2.2 percent to 18.3 million barrels a day last week, the least since May, the Energy Department said today.

“Markets are being hurt by questions about European plans to combat the debt crisis and the release of the Beige Book,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The market is incredibly fickle right now. It takes very little to get it to reverse direction.”

Crude oil for November delivery fell $2.23 to settle at $86.11 a barrel on the New York Mercantile Exchange. The contract touched $89.51 earlier today, the highest intraday level since Sept. 16. Futures are down 5.8 percent this year.