Oil prices tumble on European debt concern

Oil prices fell Friday with a critical bailout plan for Greece’s economy in limbo, again raising the specter of bank failures and bankruptcies in Europe.

The European Union has struggled for years with massive government debts. Investors worry that the festering credit crisis will spread to the rest of Europe, further slowing down the EU economy and reducing demand for oil.

Those concerns heated up Friday after European finance ministers said that Greece has not met the necessary spending cuts for further loans. Greece’s government promised to push through new austerity measures, but some lawmakers have balked as unions organized mass protests against the cuts.

“This looks to drag out until the end of the month, now,” said Michael Fitzpatrick, editor-in-chief of the Kilduff Report. “A flat-out bankruptcy is back on the table, and is the increasingly likely scenario.”

Benchmark crude fell by $1.17 to end the week at $98.67 per barrel in New York. Brent crude fell by $1.28 to finish at $117.31 per barrel in London.

Major stock indices also dropped. They were down about 1 percent each in late afternoon trading.

Also weighing on prices were a stronger dollar and the latest forecasts by the International Energy Agency, which lowered its projection for world demand for crude as global economy slows.

In other energy trading, heating oil fell by 3 cents to finish at $3.18 per gallon, while gasoline futures gave up 4 cents to end at $2.97 per gallon. Natural gas futures were flat, ending the week at $2.48 per 1,000 cubic feet.