The Associated Press May 22, 2012, 12:48PM ET

Oil near seven-month lows at $91.50

The price of oil is near seven-month lows following warnings of a "severe recession" in Europe and an apparent easing of tensions over Iran's nuclear program.

Benchmark U.S. crude lost $1.07 to $91.50 per barrel Tuesday in New York while Brent crude fell by 31 cents to $108.50 per barrel in London.

Oil prices have declined almost every day this month as elections in Greece and France threatened existing plans to fix the eurozone economy. The Organization for Economic Cooperation and Development said Europe, which consumes 18 percent of the world's oil, could fall into recession this year if leaders fail to stimulate the economy.

If that happens, it would stunt growth in world oil demand at a time when supplies are expanding.

Saudi Arabia, Iraq and Libya are producing and exporting more oil this year. And analysts say Iran's oil exports could keep flowing if it lets international inspectors into its nuclear facilities as part of a new deal announced Tuesday.

Western leaders fear Iran is building a nuclear weapon. They've been trying to cut off Iran's oil exports this year to pressure the country to allow in nuclear inspectors. Many nations already have stopped buying Iranian crude and Europe is expected to embargo all oil imports from Iran in July.

Iran says its nuclear program is for peaceful purposes only, but it so far has barred independent inspectors. If it allows them in, Europe may reward Iran by canceling the embargo, said Michael Lynch, president of Strategic Energy & Economic Research.

"If they don't end it, it could be significantly delayed," Lynch said.

Fears of a protracted standoff with Iran had helped push benchmark crude near $110 per barrel in February. Prices have since fallen below levels of early November, when the United Nations first warned of a potential nuclear threat from Iran.

Uninterrupted Iranian exports could boost world oil supplies to an average of 89.15 million barrels per day, according to the latest projections from the Energy Information Administration. That would be more than enough to meet world demand.

At the pump, U.S. gasoline prices fell nearly a penny to $3.68 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded has dropped by 25.6 cents since peaking this year in early April.

In other futures trading, heating oil added less than a penny to $2.8668 per gallon while wholesale gasoline was flat at $2.9381 per gallon. Natural gas added 9.3 cents to $2.702 per 1,000 cubic feet.

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