NEW YORK — Investor jitters about Europe snuffed out a rally in the price of oil on Tuesday.
Oil was trading above $92 per barrel but reversed course after Egan Jones downgraded Spain's debt, dropping it further into junk status. The ratings agency warned that widespread unemployment and a contracting economy will make it tough for Spain to repay its debts. The euro also plunged to a 22-month low.
The price of oil dropped about 2 percent in less than 30 minutes. Benchmark U.S. crude ended the day down 10 cents at $90.76 per barrel in New York. Brent crude, which helps set the price for oil imported into the U.S., lost 43 cents to finish at $106.68 per barrel in London.
Analysts have been concerned that Spain and other weak European economies could drag the European Union into recession this year. That would not only impact Europe, a region that consumes 16 percent of the world's oil. It also could harm trading partners like the U.S. and China and slow down global demand for oil.
"That lack of confidence is coming in to the marketplace," PFGBest analyst Phil Flynn said.
As the euro tumbled, the dollar rose versus other major currencies and helped cut into the price of oil. Oil, which is priced in dollars, tends to drop in price as a rising dollar makes oil more expensive for foreign investors.
The euro fell with a series of troubling developments in Spain. Retail sales plunged 9.8 percent last month, compared with a year ago. That's more than double the sales decline in March. Spain's fourth-largest bank also announced late last week that it would need an additional $24 billion in state aid.
Spain already is in a recession with a 24.4 percent jobless rate.
In the U.S., a private research group reported that U.S. consumer confidence fell this month compared with April. That's a disappointing sign for an economy that's driven by consumer spending.
Meanwhile, gasoline prices fell by 3 cents over the Memorial Day weekend to $3.64 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. The national average has dropped by nearly 30 cents per gallon since the first week of April.
In other futures trading, natural gas lost 13.9 cents to end at $2.429 per 1,000 cubic feet. Natural gas has lost about 22 cents in the past two trading sessions.
Heating oil lost 2 cents to finish at $2.8088 per gallon while wholesale gasoline added 1.36 cents to finish at $2.9065 per gallon.