LONDON (AP) — The price of oil sank toward $89 a barrel Monday as a flare-up in Europe's debt crisis and concern over Chinese economic growth suggested demand for crude will weaken.
The benchmark crude futures contract for September delivery was down $2.55 at $89.28 a barrel by late morning European time in electronic trading on the New York Mercantile Exchange. The August contract, which expired Friday, ended down $1.22 at $91.44 per barrel in New York.
Brent crude was down $2.76 at $104.07 a barrel on the ICE futures exchange in London.
European financial markets were battered as the government borrowing rates of Spain and Italy rose sharply Monday on fears they will eventually need sovereign bailouts. Spain's key 10-year borrowing rate neared 7.5 percent, a level considered unsustainable for more than a few months.
Europe's lengthy battle with a massive government debt crisis has pushed about a third of the 17 euro countries into recession, cutting demand for oil and other energy products. It has also taken a toll on industries in other countries such as the U.S. and China.
On Friday, Spain's government predicted its recession will extend into next year and the region of Valencia said it needed help from the central government to pay its bills. In Germany, finance officials said growth in Europe's strongest economy likely slowed in the second quarter.
The already dim global economic outlook was further clouded by weekend reports that an adviser to China's central bank predicted the world's second largest economy could slow further in the third quarter. Economic growth in the world's No. 2 crude consumer slowed to a three-year low of 7.6 percent in the second quarter as foreign demand for Chinese exports weakened and measures to control inflation crimped activity.
In other energy trading, gasoline was down 6.8 cents at $2.88 a gallon and heating oil fell 7.1 cents to $2.85 a gallon. Natural gas was down 3.1 cents at $3.05 per 1,000 cubic feet.