Brent below $112, economy stems supply worries
Singapore, October 8, 2012
Brent crude slipped below $112 per barrel on Monday, dropping for a second straight session on concerns a fragile global economy could curb oil demand, but supply worries stemming from tensions in the Middle East may help check losses.
The World Bank cut on Monday its economic growth forecasts for the East Asia and Pacific region, home to two of the world's largest oil consumers, and said there was a risk the slowdown in China could get worse and last longer than expected.
Concerns about Europe persisted with the region's largest economy Germany posting a drop in industrial orders in August, while a firm dollar after a surprise drop in the US jobless rate also curbed oil prices. A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.
Brent November crude fell 58 cents to $111.44 a barrel by 0454 GMT after a 0.33 per cent decline last week. US November crude fell 55 cents to $89.33.
"Oil is still finely balanced. On the one hand, we still have effects of a slowing economy and what that means for oil demand. On the other hand, there is oil supply risk at the moment," said Michael Creed, an economist at National Australia Bank.
Oil prices continued to draw support from worries about potential threats to supply as the Syrian civil conflict drags on and as Iran's dispute with the West over its nuclear programme persists.
Turkey returned fire for a fifth day against incoming bombardment from northern Syria. The exchanges are the most serious cross-border violence in Syria's conflict and highlight how the crisis could destabilise the region.
The United States and Europe are looking at more economic sanctions to pressure Iran to abandon its nuclear programme.
Middle East conflicts and delays in the October loading of North Sea Forties cargoes have pushed brent's premium to US crude to its highest since October 2011.
"As those supplies come back online, we should start to see it narrowing," Creed said, referring to the Forties delay.
The spotlight will be back on the euro zone this week as German Chancellor Angela Merkel visits Greece while the world's finance ministers meet in Luxembourg.
Investors have turned more cautious as hedge funds and other large speculators cut their bets on higher oil prices for the second straight week in the seven days to October 2, the US Commodity Futures Trading Commission said.
The closely watched presidential election in Venezuela came to an end with socialist President Hugo Chavez being re-elected, quashing the opposition's best chance at unseating him in 14 years and cementing himself as a dominant figure in modern Latin American history. – Reuters