Oil fell to a three-month low as the euro weakened against the dollar after European elections stoked speculation that austerity efforts will be derailed.

Futures dropped for a fourth day after France elected Francois Hollande president and Greek voters flocked to anti-bailout parties, sending the euro to the lowest level since January. Hollande, who will become the first socialist in 17 years to control Europe’s second-biggest economy, pledged less austerity and more growth.

“The election’s been bearish for the euro and a stronger dollar typically helps put downward pressure on oil,” said Mike Wittner, head of oil market research at Societe Generale SA in New York. “Certainly it’s been seen as bearish for oil today. But if it does result in some moves toward growth, it may be positive for oil prices in the future.”

Crude for June delivery slid 55 cents, or 0.6 percent, to $97.94 a barrel on the New York Mercantile Exchange, the lowest settlement since Feb. 6. Prices have fallen 11 percent since Feb. 24, when they reached the 2012 high of $109.77.

Brent oil for June settlement slid 2 cents to settle at $113.16 a barrel on the London-based ICE Futures Europe exchange.

The euro fell as much as 1 percent against the dollar to the lowest level since January. It was down 0.2 percent to $1.3056 at 2:36 p.m. When the euro weakens against the dollar, it reduces oil’s appeal as an investment.

‘New Range’

“There is this big change of political parties in France and Greece and the euro got whacked,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “We are developing a new $10 range from $95 to $105.”

Hollande inherits an economy that is barely growing, with jobless claims at their highest level in 12 years. His platform calls for policies that German Chancellor Angela Merkel opposes, including higher taxes, increased spending and delayed deficit reduction. Germany is Europe’s largest economy.

“Austerity isn’t inevitable,” Hollande told supporters in Tulle, France, last night after he won 52 percent of the vote. He defeated Nicolas Sarkozy.

Hollande’s comments were echoed in Greece, where voters flocked to anti-bailout groups, leaving the two main parties, New Democracy and Pasok, a seat short of a majority if they govern together, an Interior Ministry projection showed. New Democracy leader Antonis Samaras said today that he failed to forge agreement to form a new government.

“The European election results make people worry that there is going to be instability and weaker economic results in Europe,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Euro Declines

Greece now faces a 50 percent to 75 percent likelihood of leaving the euro in the next year to 18 months, Citigroup Inc. economists Guillaume Menuet and Juergen Michels wrote in a report today. They’d previously estimated the risk of a euro exit at 50 percent.

“Europe may become locked in turmoil again and it’s obviously going to decrease economic activity and create uncertainty,” said Phil Flynn, an analyst at PFGBest in Chicago.

Crude may fall further on “lackluster” macroeconomic conditions and bearish fundamentals, Hussein Allidina, head of commodities research at Morgan Stanley, said in a research note dated yesterday.

Oil supply is forecast to exceed demand by 813,000 barrels a day through 2012, Allidina said. The corresponding increase in inventories will occur as long as the Organization of Petroleum Exporting Countries maintains current production levels, which rose “counterseasonally” to 31.4 million barrels a day in March, he said.

Rising Inventories

U.S. oil inventories climbed 2.84 million barrels to 375.9 million in the week ended April 27, the most since September 1990, according to the Energy Department. Domestic output increased 8,000 barrels a day to 6.12 million, the highest level since November 1999. Total consumption fell for a third week, dropping 1.1 percent to 18.5 million barrels a day.

“Production continues to rise but demand is still relatively weak,” Flynn said. “Fundamentals don’t look good and we’ll see lower prices.”

Hedge funds raised net-long positions, or wagers that prices will rise, by 12 percent in the seven days ended May 1, according to the Commodity Futures Trading Commission’s Commitments of Traders report on May 4. It was the largest increase since Feb. 14.

Electronic trading volume on the Nymex was 511,369 contracts as of 2:40 p.m. in New York. Volume totaled 884,050 contracts on May 4, 42 percent above the three-month average. Open interest was 1.61 million, the highest level in almost a year.