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LONDON (Reuters) - Oil prices dipped towards $105 a barrel on Monday as investors remained cautious ahead of the U.S. presidential election and eyed demand destruction after Superstorm Sandy, whilst a stronger dollar also weighed.
Front-month Brent futures were down 28 cents at $105.40 a barrel at 1419 GMT, near three-month lows, while U.S. crude was up 6 cents at $84.92 a barrel.
Traders and analysts said a combination of demand worries linked to Sandy and the eurozone debt crisis, and investor nervousness about ramping up exposure to riskier assets ahead of the U.S. election, was keeping oil prices under pressure.
"The demand figures are just not there for oil," said Rob Montefusco, a broker at Sucden Financial in London.
Instead investors preferred perceived safe-havens such as the dollar, which was up 0.23 percent against a basket of currencies .DXY at 1411 GMT. A stronger dollar makes commodities priced in dollars more expensive for buyers using other currencies.
"With the outcome of the presidential election highly uncertain, investors may remain on the sidelines or even deleverage further, before returning after the election outcome is known," said analysts at BNP Paribas.
President Barack Obama and Republican challenger Mitt Romney are locked in a close race as voters head to the polls on Tuesday.
Markets are also worried about the outcome of Congressional talks over the ‘fiscal cliff', a package of tax increases and spending cuts that will take effect in January if there is no long-term pact to cut the U.S. budget deficit.
Failure to find a speedy solution to the fiscal cliff could push the world's biggest economy into a deep recession and cut energy demand far more than expected.
"After the election, more confidence should come into the markets," said Eugen Weinberg, an energy analyst at Commerzbank in Frankfurt. He added that investors were also awaiting the outcome of the Chinese 18th Party Congress this week.
"We expect the new leadership in China to undertake further economic support measures which will have a positive impact on commodities," he said.
In Europe, markets watched a Greek vote on reforms, which is crucial to securing billions of euros in aid. Greece's government will present the latest austerity package to parliament on Monday but will struggle to get it approved in a vote expected on Wednesday.
Disruption to oil supply infrastructure in the United States by Superstorm Sandy has prevented motorists from filling their fuel tanks. U.S. gasoline prices have posted their biggest fall sine 2008 over the past two weeks.
"For several days last week, it was still an open question as to how Sandy would impact the oil market but now it's clear you have reduced demand because people cannot consume, and that is bearish for oil markets," said Bjarne Schieldrop, chief commodity analyst at SEB.
He added that OPEC was still maintaining solid production, so the market had ample supplies of oil. Meanwhile, the structural tightness in distillates, which has persisted through Europe's seasonal refinery maintenance, is fading as refineries ramp up runs, he said.
Sandy triggered widespread liquidation of both long gasoil and crude oil positions last week, with the CFTC reporting lower speculative open interest on Friday [ID:nEMS0D1WRP] [ID:nL1E8M2DLL].
A Jones Act waiver by the U.S. government to allow foreign tankers to take fuel from the U.S. Gulf Coast to the East Coast to ease the supply crunch helped cement the sell-off.
The North Sea's Buzzard oilfield was expected to return to production on Saturday after numerous delays. The UK's largest oilfield has been offline for maintenance since September 4, tightening the supply of Forties crude which helps set the price for the Brent crude benchmark.
Additional reporting by Ramya Venugopal and Rebekah Kebede; editing by William Hardy