London: Brent crude oil fell on Wednesday, pinned near 17-month lows, hit by worries over Spain’s high borrowing costs and prospects for global demand growth.
Brent oil for August delivery was down 30 cents at $95.46 per barrel by 3:00pm. It fell as low as $94.86 earlier, near Tuesday’s trough of $94.44, its lowest since January, 2011.
US July crude, which expires on Wednesday, was up 1 cent at $84.04 per barrel.
Expectations that the US Federal Reserve’s policy meeting may result in stimulus for the world’s largest economy failed to halt a slide in Brent, which has tumbled 22% this quarter, its biggest fall since late 2008.
“Oil has really decided it has no interest in the FOMC, it has not priced in any significant stimulus,” said David Morrison, analyst at GFT Global.
The US central bank will release a policy statement at the end of its two-day meeting later on Wednesday, followed by a briefing by Chairman Ben Bernanke.
“It must be because investors are looking ahead and seeing that the situation in Europe isn’t going to get any better, while the outlook for demand in the U.S. is poor and China is slowing too,” Morrison said.
Fears that Spain’s soaring bond yields could eventually lead to an international bailout for Madrid further darkened an already bleak outlook for the euro zone.
Spain moved closer to becoming the largest euro zone country yet to be shut out of credit markets after paying a euro era record price to sell short-term debt, with yields on longer-term bonds also at unsustainable levels at above 7 percent.
The market seems well-supplied with oil, and traders were not focusing on supply disruption risks posed by sanctions on key producer Iran over its disputed nuclear programme.
Brent crude ended lower on Tuesday on relief that negotiations in Moscow to defuse the dispute over Iran’s nuclear programme led to plans for technical talks to be held in Istanbul on 3 July.
A deal had not been widely expected and although experts said the sides were far apart, they welcomed the fact talks had at least not broken down completely.
If talks do eventually collapse, financial markets could be hit by fears of war and of higher oil prices because Israel has threatened to attack Iranian nuclear sites if diplomacy fails to stop Tehran getting the nuclear bomb, something the Islamic Republic denies it is seeking.
The market is awaiting an inventory report from the US Energy Information Administration later in the day for trading cues. Oil prices could be supported by a projected drop in US crude oil stockpiles for a third straight week.
On average, crude stocks are forecast to have dipped 1.1 million barrels in the week to 15 June, according to a Reuters survey of 12 analysts.
The American Petroleum Institute on Tuesday said domestic crude stocks fell by 550,000 barrels last week, with crude imports down 82,000 barrels per day.