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Oil hovers below $95 amid Europe worries

By early afternoon in Europe, benchmark oil for June delivery was down 7 cents to $94.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.35 to settle at $94.78 in New York on Monday.

In London, Brent crude for July delivery was up 69 cents at $112.26 per barrel on the ICE Futures exchange.

Crude has sunk about 11 percent from $106 earlier this month amid signs of slowing economic activity in the world’s two biggest oil consumers, the U.S. and China.

This week, traders are worrying that Greece’s inability to form a government after recent elections could worsen that country’s debt crisis and recession, and undermine confidence throughout Europe.

“Greece’s struggle to form a new government has moved to center stage,” energy trader and consultant Ritterbusch and Associates said in a report. “The possibility of a significant economic slowdown in European economic activity is prompting contagion fears.”

Growth of 0.5 percent in Germany during the first three months of the year compared with the last quarter of 2011 helped the 17-nation eurozone avoid recession — but just barely — with a flat reading in January-March. Two successive negative quarters would qualify as a recession and the euro bloc had contracted by 0.3 percent in October-December 2011.

“The strong German GDP figures increased risk appetite and spread some optimistic signs across the equity and commodity boards,” said an energy markets report from Sucden Financial in London.

Oil investors were also taking their cues from global stock markets, which have slumped so far this month. The Dow Jones industrial average fell 1 percent Monday while Asian and European stock markets were mixed within a narrow band on Tuesday.

Traders will later be monitoring fresh information on U.S. stockpiles of crude and refined products.

Data for the week ending May 11 is expected to show a build of 1.5 million barrels in crude oil stocks and a draw of 480,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department’s Energy Information Administration — the market benchmark — will be out on Wednesday.

In other energy trading, heating oil rose 0.91 cent to $2.9386 per gallon and gasoline futures gained 1.09 cents to $2.9699 per gallon. Natural gas fell 0.9 cent at $2.422 per 1,000 cubic feet.