Oil suffers from "risk-off" play on euro zone fears; European finance ministers aim to safeguard stability of euro
Oil slipped for a third day on Tuesday as pledges to contain the spread of the euro zone's debt crisis failed to dispel unease among investors about slowing energy demand growth.
Ministers from the 17 countries that share the European currency on Monday vowed to safeguard stability in the euro area and promised new measures "shortly", but set no deadline after another day of turmoil across financial markets.
Brent crude shed 89 cents to $116.35 a barrel at 0223 GMT, while US crude for August dipped 76 cents to $94.39. Both contracts fell more than $1 on Monday.
"Any continued contagion, including in Spain and Italy, or any of the larger economies, could certainly drive oil prices lower," Anthony Danaher, president of Los Angeles-based Guild Investment Management, said from Singapore.
"The risk-off play can persist for a few days, until it gets to a point where investors have liquidated short-term positions and value seekers step in," said Danaher, adding that a new global round of monetary easing may send Brent prices towards records near $150 later this year.
Disappointing US employment data and falling crude imports in China soured the mood in the oil market over the past two trading sessions. This has dented Brent's rally from about $102, a low reached after the June 23 announcement by the International Energy Agency (IEA) of a coordinated emergency stockpile release.
Now Brent's price is at a similar level to where the front-month contract was trading when the Organisation of the Petroleum Exporting Countries (OPEC) failed to agree on a collective output increase on June 8.
The IEA on Monday said the amount of oil made available from emergency stocks would be slightly less than earlier stated after sales by member-countries met with mixed demand.
Oil available under the plan will amount to 59.83 million barrels, down 784,000 barrels from an earlier estimate, said the IEA, an adviser to 28 industrialised countries, in a statement on its website.
US crude oil inventories probably fell for a sixth straight week as imports declined, analysts forecast on Monday in a preliminary Reuters poll ahead of weekly reports.
All 10 analysts polled forecast a drawdown in crude stocks, with the average at 2 million barrels, for the week to July 8. Gasoline stockpiles were projected to have risen by 400,000 barrels, on average, after a drawdown the week before.
Distillate stockpiles, which include heating oil and diesel, were expected to have risen by 600,000 barrels.
Crude imports by China will recover in July from a downward blip as refiners crank up production to meet rising demand after a heavy maintenance program led to the first decline in six months in June.
But demand growth at the world's second-largest oil consumer is expected to slow this year from last, as higher interest rates pare consumption.
In other markets, Asian equities suffered sharp losses on Monday while the euro remained under pressure on escalating worries that the threat of contagion from the Greek debt crisis could lead to more countries requiring financial aid.
Euro zone finance ministers promised cheaper loans, longer maturities and a more flexible rescue fund on Monday to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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