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Brent crude slips below $112 on euro zone crisis

Brent crude slips below $112 on euro zone crisis
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First Published: Mon, Nov 07 2011. 03 59 PM IST

Updated: Mon, Nov 07 2011. 03 59 PM IST
London: Brent crude oil slipped below $112 per barrel on Monday as worries over political instability in Italy, the euro zone’s third biggest economy, overshadowed a coalition deal in Greece, fueling fears of global economic slowdown.
The dollar and gold rose as investors looked for safe havens while stocks, base metals and other risky assets fell. The MSCI world equity index shed 0.6% and the FTSEurofirst fell 1.4%.
Italy has the biggest government bond market in the euro zone, with Italy’s debt levels stuck at 120% of GDP, the country’s debt problems would pose a much bigger risk to markets than Greece does.
Brent futures for December slipped 3 cents to $111.94 by 03:30 pm. Brent settled $1.14 higher on Friday, rising for a second week. US December crude oil futures fell 60 cents to $93.66 a barrel. The contract rose 1% last week, posting a fifth straight weekly gain.
“The relatively good news from Greece has been offset by new worries about Italy,” said Christophe Barret, global oil analyst at Credit Agricole. “Economic news around Italy and Greece is dominating the market.”
Financial markets were up slightly in Asian trade on Monday on optimism the Greek debt crisis could be contained as Prime Minister George Papandreou and opposition leader Antonis Samaras agreed to form a new coalition government.
But details of a deal to resolve Greece’s debt crisis remained sketchy and, with the country due to run out of money in a few weeks, the European Union told Greek leaders to explain by Monday evening how they would form a government to get the €130 billion ($180-billion) emergency funding.
Italy
Market attention, meanwhile, shifted to Italy where state borrowing costs have risen sharply with the Italian 10-year government bond yield rising more than 100 basis points since late September.
Seasonal factors offer some support to oil.
Low fuel inventories in the world’s top oil consumer, the United States, amid signs of an earlier-than-usual onset of winter may prompt refiners to ramp up output. That may further squeeze an already tight crude market coping with disruption in supplies from Libya and the North Sea.
Tens of thousands of homes remain in the dark a week after a freak October snowstorm paralyzed the US Northeast and cut power to more than 3 million customers.
Investors watched the unfolding bankruptcy of MF Global. CME Group and IntercontinentalExchange Inc moved over the weekend to limit the fallout from the MF Global bankruptcy on futures markets by lowering margin requirements on some accounts.
The CME said on Monday it asked brokers who have taken over customer accounts from MF Global, which filed for bankruptcy on 31 October, to not disburse any of the money until the close of business on Tuesday as it looks to verify the amounts involved.
Crude benchmarks found some support on concerns of supply disruptions from major producers in the Middle East and North Africa as winter demand sets in.
Qatar’s Prime Minister called for Arab states to meet next Saturday to weigh Syria’s failure to implement a deal struck with the Arab League to end bloodshed that was touched off by the protests against President Bashar al-Assad.
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First Published: Mon, Nov 07 2011. 03 59 PM IST
More Topics: Oil | Crude | Markets | Commodity | ICE Brent |