Oil Prices Crash to a 10-Month Low

Oil (NYSE:USO) heads for its third weekly decline today as slowing global recovery is dampening demand. After climbing over the past two days, futures slipped 2% this morning.

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Crude hit a 10-month low of $75.71 a barrel after trading as high as $85.97 earlier this week. Crude for September delivery fell to $84.02 a barrel in electronic trading on the New York Mercantile Exchange, after climbing 3.4% to $85.72 just yesterday. Futures are now down 1.9% for the week, and 6.7% in 2011. September Brent Crude fell 1.1% to $106.86 a barrel on the London-based ICE Futures Europe exchange, a $23 premium to U.S. Brent futures, down from a record close of $23.79 on August 10.

Reports that consumer spending fell in France (NYSE:EWQ) during the second quarter, and that French banks are facing funding shortages and could be looking at downgrades, has heightened fear that the sovereign debt crises of countries like Italy (NYSE:EWI) and Spain (NYSE:EWP)have finally contaminated one of the European Union’s strongest, and largest, economies. France’s economy is second only to Germany (NYSE:EWG) in the euro zone. While France’s gross domestic product rose 0.9% in the first quarter, the most it’s grown in four years, it was unchanged in the second.

The EU’s statistics office in Luxembourg announced today that industrial production fell by 0.7% in the euro zone in June, led by a decline in capital goods orders. French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet next Tuesday in Paris to discuss government involvement in economic matters plaguing the region.

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U.S. consumer confidence dropped to its lowest level since May last week, indicating that Americans are more likely to save their money and spend less on non-essentials like gas. A survey showed that even high earners, homeowners, and those working full time became more pessimistic about the state of the economy. While oil got a boost yesterday after initial unemployment benefits applications decreased to their lowest level in four months, the continual up-and-down of stock markets following conflicting economic data — consumer confidence is down but so is unemployment, consumers are spending less and yet retail sales are climbing — has Americans unsure of how to respond, and that volatility “cripples confidence”, according to Ben Westmore, an economist at National Australia Bank in Melbourne.