Oil prices sink on Cyprus worries

Oil prices sank Tuesday as legislators in Cyprus rejected a linchpin part of the EU-IMF bailout, sparking anxiety over a new crisis for the eurozone. A barrel of US benchmark West Texas Intermediate for April delivery settled at US$92.16 a barrel, down US$1.58 from Monday's close. The European benchmark Brent, for May delivery, dropped US$2.06 to US$107.45 a barrel. Oil prices fell from early in the New York session as it became evident that Cyprus's parliament would reject the controversial bank deposit tax set as part of a rescue deal agreed by Cypriot leaders, the European Union and the International Monetary Fund. Later Tuesday, the parliament overwhelmingly rejected the measure, putting the bailout and the survival of Cyprus's banks inquestion. "The overall concern is obviously that it spreads... and turns Europe into just a complete disaster," said Kyle Cooper, managing partner at IAF Advisors in Houston, Texas. "It puts into question the validity and stability of the euro," he added. Andy Lipow of Lipow Oil Associates in Houston said markets were also reacting to the return of shut-in production from the North Sea and the impending return to the market of oil from Sudan. "We are seeing the supply situation on crude get better in Europe, and, here in the US, crude oil production continues to rise," said Lipow. The renewed European crisis also drove the euro lower, driving up the cost of US dollar-denominated oil in that market.