Brent slips below $111 on bleak US data, 'fiscal cliff' worries

Tue Dec 4, 2012 8:33am IST

* Weak U.S. data, fiscal uncertainties keep markets on tenterhooks

* Israel, Syria worries keep prices supported

* Coming up: U.S. API weekly stocks data; 2130 GMT

By Ramya Venugopal

SINGAPORE, Dec 4 (Reuters) - Brent futures slipped below $111 per barrel on Tuesday as demand concerns moved into focus after weak manufacturing data from top consumer the United States, while uncertain U.S. fiscal deficit negotiations also kept investors on the edge.

But supply worries stemming from simmering tensions in the Middle East including a fragile ceasefire between Israel and Palestine and worsening unrest in Syria helped cushion prices.

"Oil markets are starting to come off on the weaker-than-expected manufacturing data and the fact that the U.S. economic outlook remains unclear," said Natalie Rampono, commodity strategist at ANZ in Sydney.

"We are also seeing mixed headlines on the "fiscal cliff" negotiations, so markets have already taken on a cautious outlook on that account."

Front-month Brent futures slipped 29 cents by 0258 GMT to $110.63, after breaking through a key resistance level to close below its 200-day moving average in the previous session.

U.S. crude slipped 32 cents to $88.77 per barrel. Following its inability break above resistance at $90.30, the contract will probably head into a $87.19-$87.93 range, according to Wang Tao, Reuters market analyst, commodities and energy technicals.

U.S. WORRIES

Investors have been fretting about the fiscal health of the world's biggest economy, especially in light of the ongoing weakness in the crisis-ridden euro zone.

Concerns increased after the Institute for Supply Management (ISM) said on Monday that its index of national factory activity fell to 49.5 in November from 51.7 the month before, the lowest since July 2009.

The U.S. data outweighed the positive impact from Chinese manufacturing data earlier on Monday, which reaffirmed the view of a pickup in the world's biggest energy consumer.

Adding to jitters is the increasing uncertainty on negotiations to avert a "fiscal cliff", a $600 billion package of spending cuts and tax increases effective early 2013 that threatens to tip the economy back into recession.

The White House dismissed a proposal from congressional Republicans on Monday that included tax reforms and spending cuts, saying it did not meet President Barack Obama's pledge to raise taxes on the wealthiest Americans.

MIDDLE EAST CONFLICT

Incessant tensions in the Middle East and related worries about the impact on oil supplies from the region continue to support prices.

The biggest concern at the moment is that the fragile ceasefire between Israel and Palestine may be at risk after Israel said it will continue to expand its settlements in West Bank and East Jerusalem.

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 are 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. (Editing by Himani Sarkar)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Quarterly Results

Quarterly Results

HDFC Bank net profit up 20 percent, lags estimates.  Full Article 

China Economy

China Economy

China's growth slowest since global crisis, annual target at risk  Full Article 

Coal Reforms

Coal Reforms

Factbox - India pushes ahead with coal reforms  Full Article 

Apple Result

Apple Result

Apple's iPhone sales beat Street but iPad volumes slide  Full Article 

Airport Accident

Airport Accident

Total CEO de Margerie killed in Moscow plane accident - airport spokeswoman.  Full Article 

Nadella's Paycheck

Nadella's Paycheck

New Microsoft CEO Nadella's pay tops $80 mln with big stock awards.  Full Article 

Deregulation Impact

Deregulation Impact

Private fuel retailers to dip toe, not dive back, into India  Full Article 

JLR China

JLR China

JLR sees 20 percent growth in China sales this year - exec  Full Article 

An RBI First

An RBI First

RBI releases minutes of financial stability council's Aug meet  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage