Oil Near $88 Amid European Financial Turmoil Oil prices hovered around $88 a barrel Thursday as a fresh wave of sour economic news from Europe lent weight to expectations that the region's slowdown will lead to lower demand for crude. By early afternoon in Europe, benchmark oil for July delivery was up 12 cents to $87.94 per barrel in electronic trading on the New York Mercantile Exchange. The contract slid $2.99 to close at $87.82 on the Nymex on Thursday. In London, Brent crude was up 19 cents at $103.66 per barrel on the ICE Futures exchange. Experts are concerned about a banking crisis in Europe that may pull countries that use the euro common currency into recession. Concerns mounted Wednesday, when the European Commission reported that economic confidence has plummeted this month to the lowest level in 2.5 years. The grim outlook was further compounded by sharply higher borrowing rates for Spain and Italy. The yield on Spain's 10-year bonds, a key indicator of market confidence in the country's ability to continue to make payments on its debt, shot as high as 6.69 percent, the highest since the euro currency was launched in 2002. "The general market direction is being dictated by external factors," said a report from Commerzbank in Frankfurt. What is more, the market views the supply situation as extremely comfortable and is completely ignoring the current risks of a supply shortfall due for example to the West's nuclear dispute with Iran ... A reappraisal of geopolitical risks can always bring about a rapid shift in sentiment. The euro fell near a two-year low against the dollar Wednesday, helping to push oil prices even lower. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude barrels more expensive for investors holding other currencies. On Thursday, the euro was up slightly to $1.2411 from $1.2382 late Wednesday in New York. In other energy trading, heating oil was up 0.77 cent at $2.7515 per gallon while gasoline futures fell 0.52 cent to $2.7687 per gallon. Natural gas fell 2.1 cents at $2.397 per 1,000 cubic feet. Pamela Sampson In Bangkok contributed to this report.