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LONDON (Reuters) - Oil prices slipped toward $101 on Monday after Greece said it would miss its deficit target and as concerns rose about Franco-Belgian bank Dexia, which pulled down stocks and the euro, while the dollar strengthened.
The selling accelerated when U.S. traders arrived at their desks. At 1350 GMT Brent crude futures were down $1.71 to $101.05 a barrel after hitting an intraday low of $100.71. U.S. crude futures were down $1.92 to $77.28 after falling over $2 to $76.85.
Investors and traders have been troubled by draft figures released by Greece on Sunday showing it would miss a deficit target set just months ago in a massive bailout package. This suggests the steps taken to avert bankruptcy may not be enough.
In addition, Belgian and French finance ministers will meet on Monday to discuss ways to shore up the balance sheet of Franco-Belgium financial services group Dexia (DEXI.BR). Dexia has one of the largest exposures to Greece among non-Greek banks.
The euro and European shares also sold off as investors mulled the lack of a credible solution to Europe's debt crisis.
"Greece said it could not meet its deficit target for the rescue plan and I think that was a significant input," said Olivier Jakob, oil analyst at Petromatrix.
"There is the possibility that Belgian bank Dexia might need to go through some sort of nationalization. The market is still very jittery about the banks so that could put some pressure on there."
Christophe Barret, global oil analyst at Credit Agricole CIB, pointed to weak demand figures in the U.S. and Europe, and the return of Libyan crude to the market as likely to weigh on oil prices. "At over $100 a barrel the Brent price is still pretty high so it should continue to go down," he said.
Libya's interim government said on Monday oil output was improving at a faster rate than expected but it will take 12-18 months for production to return to normal.
Meanwhile, United Arab Emirates (UAE) OPEC governor Ali Obaid Al-Yabhouni pointed to "ominous clouds on the horizon" for oil demand because of global economic problems.
Analysts and traders are now unsure as to where oil will go next. Christopher Bake, managing director of Vitol's Dubai office, told a conference in Dubai that without an increase in OPEC production next year oil prices could be expected to rise.
"But supply capacity is sufficient to meet demand so there is no real justification for that price increase."
Jakob suggested there was a risk of some selling by hedge funds this week because last Friday was the final day for many hedge funds' quarterly redemption notice periods.
Data published by the IntercontinentalExchange (ICE) showed that hedge funds and other money managers had already reduced their net longs on ICE Brent futures and options by around 36 percent in the week to September 27.
Chinese data offered some support to prices as it showed industrial activity was improving. China's factory activity picked up in September for a second month in a row and export orders strengthened.
Additional reporting by Randolph Fabi and Seng Li Peng in Singapore and Daniel Fineren in Dubai; editing by James Jukwey