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Tue 17 Apr 2012 11:42 AM

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Brent slips to US$118 on renewed eurozone crisis fears

Brent crude for June delivery slipped 35 cents to $118.33 a barrel by 0240 GMT

Brent slips to US$118 on renewed eurozone crisis fears

Brent crude slipped to US$118 on Tuesday, continuing its steep decline from the previous session, as Spain's debt woes reignited concerns about the European debt crisis and the economic outlook for the euro zone.

Investors remained cautious as Spanish government bond yields broke through the 6 percent mark on Monday for the first time since December, stoking fears that the eurozone's fourth largest economy may need an international bailout.

Brent crude for June delivery slipped 35 cents to US$118.33 a barrel by 0240 GMT, after sliding 2.59 percent in the previous session, the biggest one-day percentage loss since December.

US crude for May delivery which expires on Friday, traded 5 cents higher at US$103.00 a barrel, after settling at US$102.93.

"Euro zone concerns are affecting all risk assets at the moment, with the bearish zone suggesting that Greece was just the side show and Spain's the real game," said Ben Le Brun, market analyst at OptionsXpress.

"Elsewhere the economic data is positive, but if something falls over in Spain and Italy, they're too big to fail and too big to bail and will likely create a domino effect."

Spain will see its borrowing costs leap when it sells short-term debt later on Tuesday, with an auction of 12- and 18-month Treasury bills, testing market nerves.

Further adding to investor worries on the crisis, Rome is set to lower the forecast for 2012 output, which predicts a 0.4 percent contraction for the eurozone's third-biggest economy.

US crude futures traded higher on stronger than expected spending by Americans in March, suggesting economic growth in the first quarter in the country was probably not as weak as many had feared.

Retail sales increased 0.8 percent, beating economists' expectations of a 0.3 percent rise, after rising 1.0 percent in February, the Commerce Department said on Monday.

US crude prices were also supported by news that a major pipeline reversal that will alleviate a large US bottleneck may start ahead of schedule.

Pipeline owners Enterprise Product Partners and Enbridge plan to advance the reversal of the flow of the pipeline by mid-May, pending regulatory approval, about two weeks ahead of schedule.

The reversal would help ease the glut in US crude stockpiles in the Midwest as the pipeline will bring Canadian oil and North Dakota crude directly to the US Gulf Coast.

Brent's premium against US. crude benchmark West Texas Intermediate (WTI) , narrowed by 40 cents to US$14.91 a barrel, after crashing to its lowest level since February in the previous session.