UPDATE 8-Oil falls on concerns about Greece debt, U.S. budget

Tue Nov 27, 2012 2:15am IST

* European finance ministers struggle with Greek debt deal
    * Looming U.S. budget crunch dents confidence
    * Nigerian oil output seen lower in January
    * Coming up: API oil inventory data 4:30 p.m. EST Tuesday

 (Adds settlement prices, analysts' forecast, Nigerian
shipments)
    By Robert Gibbons and Matthew Robinson
    NEW YORK, Nov 26 (Reuters) - Oil prices fell on Monday as
concerns about Greek debt talks and U.S. budget negotiations
outweighed worries about potential Middle East supply
disruptions. 
    After the U.S. Thanksgiving holiday muted activity late last
week, the market dipped in another day of light activity as U.S.
lawmakers showed little progress toward a compromise designed to
avoid mandated tax increases and government spending cuts
scheduled for Jan. 1. 
    President Barack Obama spoke with congressional leaders over
the weekend to avert the looming "fiscal cliff"  - tax increases
and spending cuts that take effect early next year - that
markets fear could cause a recession and further dampen fuel
demand. 
    Traders were also eyeing a third attempt by euro zone
finance ministers and the International Monetary Fund to release
emergency aid for Greece, with policymakers saying a write-down
of Greek debt was off the table for now. 
    While uncertainty about attempts to address fiscal dilemmas
on both sides of the Atlantic put pressure to oil prices, the
political crisis in Egypt kept fears about Middle East oil
supplies in focus, along with the fragile ceasefire in Gaza and
the ongoing conflict in Syria.
    "Crude is feeling some pressure from the concerns about
Greece and Spain, and the nagging worries about the fiscal
cliff, with the stock market lower and the dollar index
strengthening adding some pressure," said Phil Flynn, an analyst
at Price Futures Group in Chicago.
    In addition to the wider economic worries , U.S. equities
markets came under pressure o n c oncerns about retail sales as
the holiday shopping season gets into full swing. 
    Brent January crude fell 46 cents to settle at
$110.9 2 a barrel. The international benchmark traded as low as
$110.27 and briefly testing support at the 50-day and 100-day
moving averages of $110.59 and $100.48 a barrel, respectively.
   U.S. January crude gave up 54 cents to settle at
$87.7 4 a barrel. U.S. gasoline and heating oil futures also
fell, with the front month heating oil contract down 1 percent
on the day. 
    Trade for both crude contracts held within Friday's range as
players sought stronger signals to break out of levels seen
through most of last week. Vo l umes we re light, wi th Brent trade
45 per cent below the 30-day average and U.S. crude down 48
p erc ent below that average just after the settlement. 
   Nearly a month after Hurricane Sandy battered the East Coast
fuel distribution network, sources said Phillips 66's 
238,000 barrel per day Bayway, New Jersey, r efinery ha d
res tarted, potentially helping to ease the region's supply
crunch. 
    The plant was the last of the refineries impacted by the
storm to resume operations after being hit by floodwaters and a
power failure. [ID:nL 1 E8MQ6U2] 
     
   
    SUPPLY CONCERN 
    Crude came off early lows following news that oil shipments
from Nigeria - one of the worlds top 10 exporters - would drop
to 1.98 million barrels per day in January from 2.12 million bpd
in December following a fire, an oil spill and flooding, which
have all impacted production. [ID:nL5E 8 MQC2O]
    In addition, violent protests in Egypt over an expansion of
the powers of President Mohamed Mursi that could destabilize the
 region remained in focus. The crisis helped lift prices on
Friday. 
    On Monday, Mursi held negotiations with senior judges to try
to defuse the situation. The justice minister said he believed
Mursi would agree with Egypt's highest judicial authority on its
proposal to limit the scope of the new powers. 
    Egyptian mediators began separate talks on Monday with Hamas
and with Israel to flesh out details of a ceasefire agreed last
week that ended eight days of fighting in the Gaza Strip that
had help lift oil prices this month. 
    Ahead of weekly U.S. inventory data due out on Tuesday and
Wednesday, analysts forecast a build in crude and refined
product stockpiles for the week to Nov. 23. [ID:nL 1 E8MQ6BA]

 (Reporting by Robert Gibbons and Matthew Robinson in New York,
Christopher Johnson in London and Jessica Jaganathan in
Singapore; Editing by Marguerita Choy,  Sofina Mirza-Reid and
Andre Grenon)
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