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Oil fell to the lowest level in a week in New York as concern that the European debt crisis will spread to Italy caused the euro to tumble against the dollar and after Chinese imports slumped.

Oil dropped as much as 2 percent after Austria’s Finance Minister Maria Fekter said euro-area finance ministers would discuss Italian debt issues. The euro fell to a six-week low against the dollar. A 10 percent decline in Chinese imports and rising unemployment in the U.S. may indicate fuel demand will falter in the world’s biggest crude-consuming nations.

“There’s some pressure on oil from concerns in the euro zone,” said Tom Bentz , a broker with BNP Paribas Commodity Futures Inc. in New York. “The euro got hit pretty good. The negative jobs data in the U.S. from last week has cast a negative cloud over the market, and there continues to be some signs of slowing in China .”

Crude for August delivery fell 50 cents, or 0.5 percent, to $95.70 a barrel at 10:05 a.m. on the New York Mercantile Exchange.  Earlier, it touched $94.32, the lowest level since July 1. Prices have risen 26 percent in the past year.

Brent oil for August settlement declined $1.86, or 1.6 percent, to $116.47 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $20.77 a barrel to U.S. futures. It reached $22.13 on July 8, just shy of a record $22.29 on June 15.

A meeting of European Union and European Commission chiefs today was enlarged to include European Central Bank President Jean-Claude Trichet,  Luxembourg Prime Minister Jean-Claude Juncker  and European Economic Commissioner Olli Rehn, amid speculation Italy may be engulfed by the crisis and divisions on how to structure aid for Greece .

Euro Tumbles

The euro dropped 1.5 percent to $1.4049. Earlier, it touched $1.4026, the lowest intraday price since May 25.

Government reports in China showed net oil imports shrank 10 percent in June to the lowest level in eight months, according to Bloomberg calculations, while inflation surged to a three-year high. A U.S. Labor Department report July 8 showed that the unemployment rate unexpectedly rose to the highest level this year in June.

The U.S. and China are the two largest oil-consuming countries.

China imported 19.7 million metric tons and exported 270,000 tons of crude, customs data showed. Net imports of fuel, including gasoline and diesel, rose to 1.36 million tons in June from 930,000 tons in May, according to the data. Net purchases reached a 29-month high of 2.07 million tons in December.

U.S. equities also tumbled the most in two weeks on the Italian concerns and Chinese inflation report.

Source: Bloomberg

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