Oil prices slipped to $97 a barrel on Tuesday on concern a weakening global economy is undermining crude demand.

By early afternoon in Europe, benchmark oil for July delivery was down 29 cents to $97.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped $1.99 to settle at $97.30 on Monday following a fall of $2.64 on Friday.

On Monday, Standard & Poor’s cut Greece’s credit rating deeper into junk territory, saying the country is likely to default on its massive debts at least once by 2013. Investors are worried a disorderly restructuring of Greek debt could spark panic in the global bond market and torpedo a fragile global recovery.

“Greece continues to be a dark hole into which hopes for economic recovery get lost,” energy consultant Cameron Hanover said in a report. “At the heart of the (oil price) weakness was the continuing fear that the global recovery may be losing steam and traction.”

“Almost every day, there is some fresh economic data that seems to fit better in an anaemic recovery than in one that is robust or dynamic.”

China said on Tuesday that its inflation rate rose to 5.5 percent in May, the highest in nearly three years, while industrial production last month jumped 13.3 percent. U.S. retail sales are scheduled to be released later Tuesday.

Some analysts expect crude prices to fall over the next few months as political upheaval in the Middle East and North Africa eases. Brent will likely drop to between $105 and $110 at the end of this year, said David Carbon, head of economic research at DBS bank in Singapore.

Markets are also awaiting the release of information on U.S. stockpiles of crude and refined products.

Data for the week ending June 10 is expected to show a draw of 1.9 million barrels in crude oil stocks and a rise of 1.3 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw—Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department’s Energy Information Administration -- the market benchmark -- will be out on Wednesday.

In London, meanwhile, the separate Brent crude contract for July delivery was up 24 cents to $119.34 a barrel on the ICE Futures exchange.

Analysts said the difference between Nymex and Brent, which widened to a record of over $22 a barrel, was largely due to supply problems in Nigeria and the North Sea and the continuing loss of crude output from Libya.

In other Nymex trading in July contracts, heating oil was up 1.1 cents at $3.11168 a gallon while gasoline gained 1.46 cents at $3.0114 a gallon. Natural gas futures rose 0.7 cent to $4.653 per 1,000 cubic feet.

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