Oil slips towards $110 on economic worries
London, December 4, 2012
Brent crude oil slipped towards $110 a barrel on Tuesday as weak manufacturing data and protracted US budget negotiations fanned concerns about the health of the global economy and the prospects for energy demand.
But simmering tensions in the Middle East including a fragile ceasefire between Israel and Gaza and worsening unrest in Syria helped support prices.
Brent futures fell 79 cents by 1133 GMT to $110.13 per barrel. On Monday, Brent broke through a key resistance level to close below its 200-day moving average of above $111.
U.S. crude oil futures fell 32 cents to $88.77 per barrel.
Other markets including shares, base metals and gold also slipped.
"Almost everything is in the red," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. "This is related to factors such as demand concerns after the weaker-than-expected U.S. data and the fiscal cliff uncertainty."
Christopher Bellew, senior oil broker at Jefferies Bache in London, said oil appeared to have little to support it.
"Left without any unexpected bullish headline, oil is likely to drift below $109," he said.
The health of the U.S. economy, the world's top oil consumer, has been worrying investors, especially given the weakness of the euro zone.
"We got bad U.S. data yesterday, which fans demand worries," said Fritsch.
Concerns increased after the Institute for Supply Management (ISM) said on Monday its index of U.S. factory activity fell to its lowest since July 2009 on uncertainties over the U.S. budget negotiations and in the aftermath of Hurricane Sandy, which hit the Northeast last month.
U.S. lawmakers are locked in talks over the national budget, trying to avoid a so-called fiscal cliff - a $600 billion package of spending cuts and tax increases effective early in 2013 that threatens to tip the economy back into recession.
"Fiscal cliff concerns are likely to persist for several more weeks," analysts at Bank of America Merrill Lynch said.
The U.S. data outweighed a positive impact from Chinese manufacturing data earlier on Monday, which reaffirmed the view growth was picking up in the world's biggest energy consumer.
Incessant tensions in the Middle East and related worries about the impact on oil supplies from the region continue to support prices.
An escalation of a 20-month old civil conflict in Syria, which worsened after the government spokesman fled the country and the United Nations decided to withdraw its non-essential staff, added to fears of supply disruptions.
Investors were also awaiting inventory data from the American Petroleum Institute (API) due later on Tuesday. Crude stocks are expected to have risen by 100,000 barrels in the week ended Nov. 30, a preliminary Reuters poll showed. – Reuters
More INTERNATIONAL NEWS Stories
- Thousands of Hezbollah fighters in Syria: Kerry
- Swiss banks fear heavy fines in US tax deal
- Oil slips towards $103 on US demand worries
- US senate backs arming Syrian rebels
- Home Depot net income hits $1.2bn
- EU regulators to cap bankers' bonuses
- Gold extends losses on firm dollar
- Qatar fund to invest $500m in Russia's VTB
- Israel fires back at Syria after troops targeted
- Monster tornado kills 51 in Oklahoma town