LONDON Oil slipped under $114 a barrel on Monday as traders and investors worried that a failure to agree a deal with Greece for a second bailout would suppress demand in the eurozone, but renewed tensions with Iran kept a floor under prices.
"There's still not much confidence over the eurozone economies, and that is limiting upside from strong U.S. data and the tensions in Iran," said Ken Hasegawa, a commodity derivatives manager with Newedge Brokerage in Tokyo.
Front-month Brent crude was down 85 cents to $113.73 a barrel by 0948 GMT, ending four straight days of gains.
Brent rose 2.8 percent last week to settle near a three-month peak on Friday, after a positive U.S. jobs report fuelled hopes of stronger demand in the world's biggest economy.
U.S. crude was down 77 cents at $97.07 a barrel, after posting a loss of 1.73 percent last week.
It is being hindered by stock builds at the key delivery point of Cushing and very mild winter weather which is reducing U.S. demand for heating oil.
Analysts and traders said the retracement in Brent reflected profit-taking after Friday's leap due to surprisingly robust U.S. non-farm payroll data and concerns going into the weekend about supply disruption from Iran and Syria.
"We're now near the top of the trading range, and unless we take out this $115 there is a risk of further profit-taking," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
Christopher Bellew, a trader at Jefferies Bache in London, agreed. "It was very strong on Friday night and I think it got a bit overdone, it made such a rapid advance. Now we are seeing a bit of a consolidation," he said.
Market participants are waiting to see if Greek coalition parties accept the painful terms of a new bailout deal to avoid a messy default. This was expected on Monday, but a Greek government official has denied this deadline.
"One of the key risks in the European situation is the possibility that Greece will not achieve agreement to the austerity measures being required of them," said Ric Spooner, chief market analyst with CMC Markets in Sydney.
European shares were down in early trading, reflecting the concerns, and the euro also took a hit.
Fritsch added that a Greek deal would remove one negative factor and oil might test $115 again, but it would not be sufficient to push prices above that: "We would need further news from Iran or the economic side to do that."
The dollar was up 0.67 percent against a basket of currencies at 0937 GMT. A stronger dollar makes commodities priced in dollars more expensive for buyers using other currencies.
MIDDLE EAST TENSIONS
Meanwhile in Iran leaders continue to threaten military action in the increasingly tense stand-off with world powers over Iran's nuclear ambitions.
Iran's deputy Revolutionary Guards commander said on Sunday that Tehran would target any country used as a launchpad for attacks against its soil.
This latest warning comes days after the country's supreme clerical leader threatened reprisals for the West's new ban on Iranian oil exports and the U.S. defence secretary was quoted as saying Israel was likely to bomb Iran within months to stop it assembling nuclear weapons.
But comments by U.S. President Barack Obama over the weekend that he does not want to see more conflict in the Middle East might help to cool tensions.
In Syria an explosion ripped through an oil pipeline feeding a main refinery in the city of Homs on Monday, the second in a week to hit the pipeline [ID:nL5E8D613N].
Western and Arab states voiced outrage on Sunday after Russia and China vetoed a U.N. resolution that would have backed an Arab plan urging Syrian President Bashar al-Assad to give up power.
Geopolitical tension tends to support Brent more than U.S. crude, contributing to a widening in the spread between the two, which is now at about $17.03 a barrel.
"It's quite likely to go even wider because I don't see any resolution to what's becoming a war in Syria," said Bellew. "I can see that going on for some time."
(Additional reporting by Francis Kan)
Trending On Reuters
Fewer auspicious days later this year compelled Ramesh Phalke, an auto company employee in Maharashtra, to hold his daughter's wedding in May. This bride was lucky because many other weddings will likely be postponed - to the dismay of the country's jewellers. Full Article