Oil fell to the lowest level in more than two weeks Monday, as Moody’s Investors Service said it will review the credit ratings of all European Union countries and China’s export growth slowed to the weakest pace since 2009.

Crude dropped 1.7 percent after Moody’s said last week’s EU summit failed to deliver “decisive policy measures” to end the debt crisis. China’s exports rose 13.8 percent in November from a year earlier, compared with 15.9 percent in October, the customs bureau said Dec. 10.

“The Moody’s announcement really affects market sentiment,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There is a pretty good chance that the global oil demand will be pretty weak next year because of the European crisis and China.”

Crude for January delivery fell $1.64 to $97.77 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 25. Prices dropped 1.5 percent last week and are up 7 percent this year.

Brent oil for January settlement lost $1.36, or 1.3 percent, to $107.26 a barrel on the London-based ICE Futures Europe exchange.

Moody’s announcement came after Standard & Poor’s said last week that it may strip Germany and France of AAA credit ratings and put all 17 nations that use the euro on review for possible downgrade.

The 27 member states of the EU accounted for 16 percent of global oil demand last year, based on BP Plc’s annual Statistical Review of World Energy.

‘Under Pressure’

“We expect prices to stay under pressure as long as macro fears stay high,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “At the moment it’s Europe, providing contagion that other countries will be dragged into it, that’s keeping demand away. China’s growth may disappoint if European jitters continue.”

China’s November export growth was the least since December 2009, excluding distortions in January and February each year, customs data showed.

Exports to the European Union, China’s biggest market, rose 5 percent from a year earlier, a quarter of the pace reported in July and August.

“The news from China is another indicator of the economic weakness in Europe and it means China will use less oil,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas.

Chinese Consumption

China consumed 9.06 million barrels a day of oil in 2010, making it the second-largest user of crude after the U.S., at 19.1 million barrels a day, according to BP’s statistics review.

Oil’s loss also followed a stronger dollar and lower U.S. stocks, Lynch said. A stronger U.S. currency reduces oil’s appeal as an alternate investment.

The Dollar Index, which tracks the U.S. currency against six major peers including the euro and the yen, rose 1.2 percent. The Standard & Poor’s 500 Index fell 2.1 percent.

U.S. oil inventories probably dropped for the first time in three weeks in the seven days ended Friday as refineries boosted capacity, a Bloomberg News survey showed.

Supplies shrank by 2.5 million barrels, or 0.7 percent, to 333.6 million last week, according to the median estimate of 10 analysts polled before a weekly Energy Department report on Wednesday.

Iran’s Oil Minister Rostam Qasemi said some OPEC members should reduce output to accommodate the return of shipments from Libya and increased Iraqi exports, according to a report yesterday by the state-run Mehr news agency. The report came as oil ministers from the Organization of Petroleum Exporting Countries began arriving in Vienna before a Wednesday meeting.

Libya pumped 500,000 barrels a day in November, from a low of 45,000 barrels in the midst of the rebellion against former leader Muammar Qaddafi, according to Bloomberg estimates.

OPEC Output

Eleven of OPEC’s 12 members, all except Iraq, have formal production targets. Iraq’s daily output last month reached 2.7 million barrels, according to data compiled by Bloomberg.

Saudi Arabia, the world’s biggest oil exporter, will supply full volumes of crude under term contracts to buyers in Asia and Europe next month, according to refinery officials with knowledge of the matter.

Hedge funds and other large speculators boosted net long positions, or bets that prices will rise, by 4.1 percent to in the week ended Dec. 6 to 202,735 futures and options combined, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Friday.

Trading volume was 455,235 contracts as of 3:29 p.m. Volume was 639,563 on Dec. 9, 2.5 percent below the three-month average. Open interest was 1.32 million.