Brent slips below $111 on US election uncertainty
Singapore, November 7, 2012
Brent futures slipped below $111 per barrel on Wednesday as investors waited for more clarity on the outcome of the United States presidential elections, while the weakness in the global economy and oil demand also hurt sentiment.
But further losses may be limited on renewed supply worries after violence in the Middle East escalated and on expectations Iran's nuclear dispute with the United States and Europe will come back into focus after the elections.
President Barack Obama and Republican challenger Mitt Romney were locked in a tight race. Without a decisive win and with the two houses of Congress split between the two parties, investors expect messy negotiations to avert the looming "fiscal cliff" - nearly $600 billion worth of spending cuts and tax increases that risk pushing the economy into deep recession.
"We will be finally happy to have the elections behind us, but this is just the beginning," said Tony Nunan, an oil risk manager at Mitsubishi Corp in Tokyo.
"Now the focus will be on the fiscal cliff discussions and on the Iranian dispute, all that is still ahead of us. The global economy is still weak, but most of that is priced in."
Front-month Brent futures fell 57 cents to $110.50 per barrel at 0332 GMT, after jumping 3 per cent on Tuesday. US crude was down 58 cents at $88.13 per barrel.
All eyes will be on the US elections on Tuesday and the end of the uncertainty may lead to a short-term bounce across markets, traders say.
If the election falls short of a clear result, it risks roiling financial markets as was the case in 2000 when the Bush-versus-Gore battle ended up in the Supreme Court.
GREECE, MIDDLE EAST
Greece remains another key focus area, where a key parliamentary vote on a new set of wage and pension cuts is scheduled for Wednesday.
Greek protesters took to the streets to protest the new austerity measures, even though the parliament is expected to approve it by a narrow margin.
But supply worries continued to support oil prices after Middle East violence escalated once more.
Bombs exploded in three districts of the Syrian capital Damascus on Tuesday, killing and wounding dozens, while gunmen shot dead the brother of the parliament speaker in the latest rebel attack on a figure associated with the ruling elite.
Directly impacting oil supply out of Syria, an explosion also hit the main oil pipeline feeding a refinery on the western edge of the Syrian city of Homs on Tuesday during fighting between rebels and army forces in the area.
US crude oil inventories fell slightly last week and product stocks rose, data from the American Petroleum Institute showed on Tuesday, confounding analysts expectations in the wake of Hurricane Sandy that has caused widespread disruptions to East Coast refineries and terminals.
Inventory data from the Energy Information Administration is scheduled to be out later on Wednesday.
Crude inventories are forecast to have risen 1.8 million barrels last week while product stocks were seen falling, an expanded Reuters poll of analysts showed on Tuesday.
Also supporting US crude, data showed that Superstorm Sandy had a relatively small impact on regional gasoline demand. – Reuters