Singapore: Brent crude oil slipped below $112 a barrel on Monday as Europe stumbled over attempts to solve the euro zone debt crisis, strengthening investor fears commodity demand growth may slow.
Oil slid with stock markets, metals and the euro, while the dollar and gold rose. Markets are seeking safer assets ahead of a Federal Reserve meeting that may hint at further measures to bolster the world’s biggest economy.
Brent crude fell $1.01 to a low of $111.21 a barrel before recovering to trade around $111.90 by 1138 GMT. US crude slipped $1.44 to a low of $86.35 but then bounced to around $87.10.
“Financial markets want a precise and clear plan on how to deal with the European debt crisis, but they are not getting it,” said Christophe Barret, global head of oil research at French bank Credit Agricole. “The economic backdrop is weak.”
US housing data later on Monday could provide some guidance on the state of the world’s biggest economy and an overall picture for oil demand.
Investors also awaited the outcome of a meeting of the US Federal Reserve on Wednesday and a G20 gathering on Thursday and Friday for clues on steps governments and policymakers may take to restore market confidence.
Brent will remain neutral and stay in a range of $110.42-$116.60 per barrel, with a downside bias, while a bearish target has been established for US oil at $85.52 per barrel, according to Reuters technical analyst Wang Tao.
EUROPE CRISIS RUMBLES ON
An EU finance ministers meeting in Poland over the weekend broke no new ground in dealing with the crisis, prompting market players to reduce risk. Greece failed to announce new austerity measures even after pledging to take tough decisions needed to secure a fresh round of international aid and avoid default.
That led to the euro edging back towards a seven-month low against the dollar reached last week. The greenback rose as much as 0.8 percent against a basket of major currencies, making dollar-denominated oil more expensive for consumers.
“The EU finance ministers’ meeting over the weekend ended without making substantial progress toward solving the region’s debt crisis, or any pledge to recapitalise Europe’s banks,” ANZ Bank said in a report.
“European leaders remain firmly against fiscal stimulus due to debt concerns.”
Participants are also trying to assess how early Libya could start exporting oil to help ease supply concerns as winter approaches in the northern hemisphere. About 1.6 million barrels of crude shipments were halted after infrastructure in major fields was destroyed.
“The latest comments from officials at Libya’s Arabian Gulf Oil Company suggest that production is ramping up rapidly and that production from the Sarir and Mesla oil fields are expected to reach 200,000 barrels per day by the end of September,” analysts at JPMorgan said in a report.
Fears of the unrest spreading to other nations in the Middle East and North Africa as Yemen steps up attacks on protesters continue to put a floor on prices.
At least 26 people were shot dead and hundreds wounded when security forces fired on demonstrators who charged police lines in capital Sanaa, in a dramatic escalation of protests against President Ali Abdullah Saleh.