Oil slips towards US$110 on economic, budget worries
LONDON, Dec 4 — Brent crude oil slipped towards US$110 (RM335) 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 slipped 20 cents by 0855 GMT to US$110.72 per barrel. On Monday Brent broke through a key resistance level to close below its 200-day moving average of above US$111.
US crude slipped 15 cents to US$88.94 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 US data and the fiscal cliff uncertainty."
The health of the US economy, the world's top oil consumer, has been worrying investors, especially given the weakness of the euro zone.
Concerns increased after the Institute for Supply Management (ISM) said on Monday that its index of US factory activity fell to its lowest since July 2009 on uncertainties over the US budget negotiations and in the aftermath of Hurricane Sandy, which hit the Northeast last month.
US lawmakers are locked in talks over the national budget, trying to avoid a so-called fiscal cliff - a US$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 US 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