Oil prices fall as optimism over EU plan fades

Oil fell below $84 a barrel Monday in Asia amid waning euphoria over the latest EU plans to tackle the continent's debt and economic woes. Signs of a slowing Chinese economy also dragged crude down.

Benchmark oil for August delivery was down $1.32 at $83.64 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. In London, Brent crude for August delivery was down $1.39 at $96.41 per barrel on the ICE Futures exchange.

Crude soared $7.27 to close at $84.96 in New York on Friday after the leaders of the 27 European Union countries said that they would seek to centralize regulation of European banks and, if necessary, bail them out directly, instead of funneling loans through governments that already have too much debt.

The EU said it also plans to ease borrowing costs for Italy and Spain, the third- and fourth-largest of the 17 economies that use the euro, stop mandating painful budget cuts to every country in need of emergency financial aid and tie their budgets, currency and governments more tightly.

Some analysts were skeptical that the EU's proposals will reverse a deteriorating debt and economic crisis. Investors will be closely watching as EU finance ministers hash out the details of these plans over the next two weeks.

"We've been burned before," energy trader and consultant The Schork Group said in a report. "Wasn't Greece supposed to be stabilized in 2009, 2010, 2011?"

Evidence of a weakening Chinese economy also weighed on oil. Chinese industrial production fell to a seven-month low, according to HSBC's purchasing managers' index

In other energy trading, heating oil was down 3 cents at $2.68 per gallon while gasoline futures fell 2.7 cents at $2.61 per gallon. Natural gas slid 1.7 cents at $2.81 per 1,000 cubic feet.