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Heating Oil Falls as Stocks Slide on U.S., Europe Debt Concerns

Heating oil slid below $3 a gallon as stocks fell on speculation that a deficit impasse will force $1.2 trillion in automatic U.S. spending cuts and that Europe’s debt crisis threatens global economic recovery.

Heating oil fell to a four-week low as a congressional debt-reduction panel is expected to say it can’t reach agreement. Josef Ackermann, chief executive officer of Deutsche Bank AG, said Europe needs a “firewall” to keep the debt crisis contained and should increase the size of a rescue fund.

“The overall weakness is due to the equity market,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “There’s problems with Congress here passing a debt resolution and concerns about Europe.”

December-delivery heating oil fell 3.82 cents, or 1.3 percent, to settle at $2.9943 a gallon on the New York Mercantile Exchange, the first settlement below $3 a gallon since Oct. 19.

Gasoline for December delivery rose 1.06 cents, or 0.4 percent, to $2.489 a gallon, after touching $2.4527, the lowest price since February.

“Heating oil is most vulnerable because it’s the most expensive,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It’s still at a more than 50-cent premium to gasoline.”

Discount Narrows

Gasoline’s discount to heating oil narrowed to 50.53 cents from 55.41 cents on Nov. 18. The spread reached 62.69 cents on Nov. 14, the widest since November 2008.

Heating oil, which closed at a six-month high Nov. 11, settled below its 100-day moving average for the first time since Oct. 13.

“The primary worry is what’s going to play out in Europe,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The distillate market is much more sensitive to what’s going to happen with the global economy.”

The U.S. deficit-cutting congressional supercommittee is expected to announce gridlock today on how to achieve at least $1.2 trillion in savings, a Democratic aide said.

Today is the deadline for the Congressional Budget Office to receive input for analyzing how a proposal would affect the deficit, in advance of the panel’s Nov. 23 target for a deal.

Euro leaders must reach “a momentous deal” toward fiscal and political union by mid-January to save the 17-nation bloc, Credit Suisse said in a note to investors.

The Standard & Poor’s 500 Index slid 2 percent in New York. The MSCI All-Country World Index of stocks fell 2.3 percent.

“The uncertainty about Europe and the supercommittee drove down the stock market,” said Phil Flynn, vice president of research at PFGBest in Chicago.

Regular gasoline at the pump, averaged nationwide, fell 0.8 cent to $3.351 a gallon yesterday, according to AAA data.

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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