S&P downgrade rumours Oil prices slip on Today

6:47 PM

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S&P downgrade rumours Oil prices slip on Today
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Oil prices slipped from two-week highs on reports that Standard & Poor's may downgrade credit ratings for the wealthiest nations in Europe, dealing a serious blow to hopes for saving the euro.

The Financial Times reported that S&P will put Germany, France, the Netherlands, Austria, Finland, and Luxembourg on notice that it is reviewing their credit worthiness. Each has a one-in-two chance of a downgrade in the next 90 days, the newspaper said.

S&P wouldn't comment about the report.

If the credit ratings agency follows through with the warning, it would suggest that some of the strongest nations in the eurozone will have trouble handling massive debts run up by their more profligate neighbours.

Oil markets reacted swiftly to the news.

Benchmark crude dropped by about two per cent, or $US2 per barrel, in afternoon trading. After rising as high as $US102.44, the benchmark price ended the day about where it began, at $US100.99 per barrel, up just three cents.

Brent crude, which is used to price foreign oil varieties that are imported by US refineries, fell 15 cents to finish at $US109.53 a barrel in London.

Prices had been climbing earlier in the day after French and German leaders proposed tough new measures for a eurozone treaty that would keep members from overspending.

The S&P warning, however, reminded investors that mounting European debts may be too big for the 17-nation currency bloc to handle on its own.

Other problems continue to weigh on world markets as well, including a slowdown in the Chinese economy.

In the US, the government said companies sent fewer orders to factories in October, the second straight monthly decline, while a private index showed that service companies expanded at a slower pace in November.

The reports suggest that the world's largest oil consumer is still on a rocky road to recovery.