Oil hovers at $89 in Asia on European debt worries

KUALA LUMPUR, Malaysia — Oil prices eased but hovered at $89 a barrel on Tuesday in Asia amid renewed concerns over the European debt crisis after credit ratings agency Moody's downgraded Hungary's government bonds. Benchmark oil for January delivery shed 42 cents to $88.96 a barrel at midday Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract hit $89.76 on Monday before pulling back to settle at $89.38, up 19 cents. Moody's Investor Service on Monday cut Hungary's rating to just a step above junk category and kept its outlook as negative, meaning more downgrades are possible. It cited worries about public finance policies and exposure to foreign financial shocks. The move sparked renewed fears about Europe's fiscal and banking health. The European Union has already bailed out Greece and Ireland after similar problems. There are worries that Portugal and Spain may follow suit. "What is prompting some selling is concern about European sovereign debts coming back into the market. Some traders are also locking in profits, preventing oil from testing the $90 level and beyond," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. However, Shum said sentiment in the crude market remained quite bullish supported by the unusually cold weather in Europe that would boost demand. There are widespread expectations that the price will hit $90 a barrel by year's end and head toward $100 a barrel by next spring, when traders begin looking ahead to the summer driving season. In other Nymex trading in January contracts, heating oil eased 0.07 cent to $2.475 a gallon, gasoline fell 0.43 cent to $2.3374 a gallon but natural gas gained 0.42 cent to $4.53 per 1,000 cubic feet. In London, Brent crude shed 19 cents to $91.26 a barrel on the ICE futures exchange. — AP