Oil fell for a third day today 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 yesterday 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 $1.42 to $115.82 a barrel at 0711 GMT, while US crude for August tumbled $1.13 to $94.02. Both contracts fell more than $1 yesterday as well.
"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 Mr 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 23rd 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 8th.
The IEA yesterday 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, according to the IEA.
Output from the world's largest oil exporter, Saudi Arabia, hit a high for the year so far of around 9.5-9.6 million barrels per day (bpd) in June, up nearly 800,000 bpd from May, industry sources said on Monday.
US crude oil inventories probably fell by 2 million barrels, their sixth straight weekly drop, a Reuters poll showed before an industry report later today and government figures due tomorrow.
Gasoline stockpiles were projected to have risen by 400,000 barrels, while distillate stockpile including 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.
Reuters
