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Oil slumps to 7-month low

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Oil prices slipped to a new 7-month low Tuesday as the dollar neared a new four-year high against the euro.

What prices are doing: Crude for June delivery slipped 67 cents, or about 1%, settling at $69.41 a barrel Tuesday. The active contract for June delivery expires Thursday.

The last time crude fell below that price was September 29, when it settled at $66.71.

What's driving prices: The euro once again neared a four-year low, set in the previous day's trading session. A weakening euro and stronger dollar dampens demand for oil because it makes the commodity, which is priced in the U.S. currency, more expensive for foreign investors.

Reports that Germany will ban so-called "naked" short-selling tomorrow spooked currency investors and drove the euro down, analysts said.

Traditionally, short sellers borrow stock with the aim of selling it, then buying it back at a lower price and pocketing the difference. In a "naked" short sale, however, investors short the stock without actually borrowing it, making it much easier to drive down the share price of a company.

What experts are saying: "Short selling is part of investing, and when you see government leaders proposing rules like that, it seems a little desperate," said said James Cordier, president at Liberty Trading Group. "It struck fear into people that things are still not on the mend in Europe."

Overall, worries about a stalled global economic recovery have cut oil prices by about $15 per barrel in the last two weeks, as investors remain concerned that austerity plans in several European countries will hamper demand for fuel.

Earlier Tuesday, oil prices were rising on upbeat economic reports on new home construction and improved earnings from Wal-Mart and Home Depot. Crude reached as high as $72.36 a barrel before Europe woes once again ignited a stock market sell-off and investors took risk off the table. To top of page

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