LONDON: Oil fell more than $2 per barrel on Monday as Europe stumbled over attempts to solve the euro zone debt crisis, strengthening investor fears commodity demand growth may slow.
Oil slid with stock markets, metals and the euro, while the dollar and gold rose. Markets are seeking safer assets ahead of a Federal Reserve meeting that may hint at further measures to bolster the world’s biggest economy.
Brent crude $3.12 to a low of $109.10 a barrel before recovering to trade around $109.60 by 1324 GMT. US crude slipped $2.40 to a low of $85.56.
"Financial markets want a precise and clear plan on how to deal with the European debt crisis, but they are not getting it," said Christophe Barret, global head of oil research at French bank Credit Agricole. "The economic backdrop is weak."
Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut, agreed:
"Markets are under pressure as the European finance ministers failed to come up with anything solid this weekend. There are some strong worries that Greece is not doing what’s needed to get another round of aid," McGillian Said.
US housing data later on Monday could provide some guidance on the state of the world’s biggest economy and an overall picture for oil demand.
Investors also awaited the outcome of a meeting of the US Federal Reserve on Wednesday and a G20 gathering on Thursday and Friday for clues on steps governments and policymakers may take to restore market confidence.
Brent will remain neutral and stay in a range of $110.42-$116.60 per barrel, with a downside bias, while a bearish target has been established for US oil at $85.52 per barrel, according to Reuters technical analyst Wang Tao.
Euro zone crisis
An EU finance ministers meeting in Poland over the weekend broke no new ground in dealing with the crisis, prompting market players to reduce risk. Greece failed to announce new austerity measures even after pledging to take tough decisions needed to secure more international aid and avoid default.
That led to the euro edging back towards a seven-month low against the dollar reached last week. The dollar rose more than 0.5 percent against a basket of currencies, making dollar-denominated oil more expensive for consumers.
Analysts are assessing when Libya can start exporting oil as winter approaches in the northern hemisphere. Before the uprising against Muammar Qaddafi, Libya exported about 1.6 million barrels per day (bpd) of crude oil.
"The most recent news on Libyan oil output are encouraging," said Barret. "It looks as if production could be as much as 200,000 bpd by the end of this month."
OPEC Secretary General Abdullah Al-Badri said on Monday Gulf OPEC countries were likely to cut output as Libya’s production recovered towards pre-war levels.
Badri, who was Libyan energy minister 1990-2000 and headed its National Oil Corporation until 2006, said production in fields in central Libya could be back to pre-war levels in 15 months, while other areas might take longer.
Angola is scheduled to export 1.81 million bpd of crude in November, up from 1.57 million bpd scheduled for October, as a new oilfield helps to boost supplies, a provisional loading schedule showed on Monday.
North Sea crude oil production is also increasing slowly. BP said it restarted its Valhall production and compression platform on Sept. 17 and oil exports from the facility would rise over the coming days. –Additional reporting by Manash Goswami in Singapore
