Brent crude stabilises on Friday after posting steep losses in the previous session
Brent crude held steady at $108 a barrel on Friday, after posting steep losses in the previous session on concerns over demand growth as Europe struggles to keep its debt crisis from spiralling out of control and hurting the global economy.
Markets are worried about borrowing costs rising to unsustainable levels for nations such as France and Spain, even as Italy pledged to embark on fiscal reforms. Asian shares fell for a fourth day, and base metals slumped as investors exited riskier assets.
Brent crude traded 9 cents higher at $108.31 a barrel by 9am UAE time, after slipping as low as $107.51. US oil fell 28 cents to $98.54, after sliding to $98.01.
"The pullback that we have seen shouldn't come as a surprise, as the euro zone crisis and the ballooning costs are having an impact across the board," said Ben Le Brun, market analyst at OptionsXpress. "Markets are just trading from one headline to the next."
Brent is poised for a weekly fall of 5.4 percent, its steepest decline since the week ended September 24, and reversing three weeks of gains. US oil may post a weekly fall after six weeks of gains.
Oil prices tumbled in the previous session as investors booked profits a day after a surge to five-month highs tested key technical levels. The US benchmark settled down 3.67 percent, the biggest one-day percentage loss for front-month crude on the New York Mercantile Exchange since September 28. Brent dropped 3.27 percent.
Italy's new technocrat prime minister, Mario Monti, outlined a raft of policies including pension and labour market reform, a crackdown on tax evasion and changes to the tax system in his maiden speech to parliament.
That didn't help soothe investor worries as Spain was forced to pay the highest borrowing costs since 1997 at a sale of 10-year bonds.
"The losses seen overnight in Europe moved their way through the US markets," Ben Taylor at CMC Markets said in a report. "A move through key support levels suggests further falls."
Apart from Europe, investors are also worried about the outlook of growth in the world's top oil consumer the United States, despite a series of recent positive economic numbers.
A 12-member "super committee" has until November 23 to reach a deal to cut US deficits by at least $1.2trn over 10 years. If the panel is unable to come up with a deficit reduction plan, automatic spending cuts would kick in across federal agencies, beginning in January 2013, two months after next year's election.
"It is not just Europe - lest anyone forget, by next Wednesday, we are also due to hear the results of the deliberations of the US Deficit Supercommittee," analysts at JPMorgan said in a report. "We may be closer (to a resolution), but economic risks to the oil market over the next two weeks will be considerable."
Yet there is a floor under oil prices at current levels, thanks to supply concerns from the Middle East as tensions over Iran's nuclear programme escalate, Le Brun said.
Major powers closed ranks on Thursday to increase pressure on Iran to address fears about its nuclear ambitions, and the UN nuclear chief said it was his duty to "alert the world" about suspected Iranian efforts to develop atom bombs.
Syrian troops shelled two northern villages overnight after an attack by army defectors on forces loyal to President Bashar al-Assad, local activists said on Friday, in the first reported use of sustained shelling against the eight-month uprising.For all the latest energy and oil 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.