Oil down as eurozone fears weigh

2011-09-14 09:01

Singapore - Oil prices fell in Asian afternoon trade on Wednesday, with investor sentiment weighed by fears over Greece's deepening debt crisis and a downgrade of global energy demand.

New York's main contract, light sweet crude for delivery in October, was down $1.48 to $88.73 a barrel in afternoon trade, and Brent North Sea crude for October settlement eased 59 cents to $111.30.

"With the Greek risk overhanging the market, prices have been very edgy, very jumpy," said Nick Trevethan, senior commodities strategist at ANZ Research in Singapore.

On Tuesday, Germany, France and Greece agreed to hold a fresh round of talks on the crisis after US President Barack Obama urged greater efforts to calm volatile markets.

German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou will hold a teleconference Wednesday.

Merkel had earlier sought to soothe traders' fears over Greece, stressing that everything would be done to avoid an "uncontrolled insolvency" and emphasising the eurozone would remain intact.

Efforts to increase crude production by Libya following the ouster of Muammar Gaddafi remain under threat after forces loyal to the fallen dictator attacked oil infrastructure on Monday, analysts said.

The International Energy Agency on Tuesday revised its expectations of Libyan crude production capacity from zero to between 350 000 and 400 000 barrels per day by the end of 2011, rising to 1.1 million by the fourth quarter of 2012.

"However, if the attack by pro-Kadhafi forces on oil infrastructure on Monday marked a shift in tactics, it will put the Libyan production at risk," Trevethan said.

Gaddafi, wanted for alleged crimes against humanity by the International Criminal Court, remains in hiding but many of his inner circle and one of his sons have fled to neighbouring Niger.

Expected lower energy demand due to the poor economic climate is also dampening sentiment.

The Organisation of Petroleum Exporting Countries said demand for this year is expected to be 87.99 million barrels per day (bpd), down from a previous estimate of 88.14 million bpd.

For 2012, demand is expected to average 89.26 million bpd, down from the August estimate of 89.44 million bpd, Opec said.