SINGAPORE Brent crude futures fell below $111 a barrel on Monday, dragged down by a firm dollar and worries about weak economic growth in key consumer nations.
Although central banks in the United States, Europe and Japan have announced measures aimed at keeping asset markets well supplied with funds, growth concerns have overtaken the initial elation following the stimulus announcements.
"The optimism (over the measures) is gone and investors are starting to realize it's not backed by good economic data," said Jonathan Barratt, chief executive of BarrattBulletin, a commodity research firm in Sydney.
"Investors are not confident, that is why they're punishing commodities, including oil."
Front-month Brent futures had fallen 88 cents to $110.56 by 0634 GMT, while U.S. crude futures were 70 cents lower at $92.19 per barrel. Both contracts shed more than $1 in early trade.
Brent dropped 4.5 percent last week, while U.S. crude lost 6.2 percent on demand worries as well as a pledge by Saudi Arabia to keep prices down.
GROWTH VS STIMULUS
A firm dollar, which makes commodities denominated in the greenback more expensive for investors in other currencies, also deterred buying, adding to the pressure on oil futures.
The dollar index .DXY rose 0.3 percent on Monday as the euro reeled under increasing uncertainties in Spain and Greece, and other Asian currencies gave way to profit booking. <FRX/>
The markets had been supported for most of the month by the announcement of a third-round of quantitative easing by the U.S. Federal Reserve, increasing tensions in the Middle East between Iran and Israel and delays in North Sea oil shipments.
The Fed and the Bank of Japan launched fresh monetary easing steps in recent weeks, while the European Central Bank adopted a plan to buy bonds from euro zone states requesting assistance, to help drive down borrowing costs.
While all markets rallied following the announcement, the focus has once again shifted to worries on the euro zone debt crisis, as well as weakness in the United States and key Asian consumers such as China and India.
"The Fed and the ECB actions (have) helped buy time but are not game changers," Bank of America-Merrill Lynch analysts said in a report late on Friday.
"After a welcome relief trade, the risks from both sides of the Atlantic will grow as year-end approaches, in our view."
MIDDLE EAST TENSIONS
Escalating tension in the Middle East offered some support to prices, after Iran hinted at the possibility of a pre-emptive strike on Israel.
"Iran will not start any war but it could launch a pre-emptive attack if it was sure that the enemies are putting the final touches to attack it," Amir Ali Hajizadeh, a brigadier general in the Islamic Revolutionary Guard Corps told Iran's state-run radio on Sunday.
Global oil markets are already feeling the force of lower supplies after a western embargo on Iran oil shipments and any heightening of tensions could rattle markets further.
"The Iran story is far from over," said Jason Schenker, president of Prestige Economics in Austin, Texas.
"The implications for crude oil prices could be bullish, as could the impact on the greenback."
Adding to supply worries are the delays in North Sea shipments, especially in view of increased demand during winter in the Northern hemisphere.
Export delays in September and October are the most significant since May's loading program, when 11 Forties cargoes out of 19 originally planned were deferred, according to Reuters records based on information from trade sources.
(Editing by Ed Davies)