November 13, 2012 / 3:45 AM / 5 years ago

Brent slips below $109 on demand worries, flush supply

* Asian shares pressured by uncertainty over U.S., Europe

* Euro falls to 2-mth low vs dollar after no deal on Greece

* Threat-focused Iran launches biggest ever air drills

By Manash Goswami

SINGAPORE, Nov 13 (Reuters) - Brent crude slipped below $109 on Tuesday, declining for a second day on worries about demand growth in a well supplied market, as the United States and the European Union grapple with their financial woes.

Caution over a U.S. fiscal policy standoff and uncertainty over the euro zone’s debt problems weighed on Asian shares, the euro and base metals. Yet further losses in oil were capped by geopolitical worries in the Middle East with Iran launching a massive military drill across half the country.

Front-month Brent slipped 47 cents to $108.60 a barrel by 0323 GMT, after settling below its 100-day moving average of $109.19. U.S. crude declined 40 cents to $85.17, after ending 50 cents lower.

“There is plenty of oil and the market is well supplied, but the economic outlook both in the United States and Europe is weak and that’s putting downward pressure on prices,” said Ken Hasegawa, a commodity sales manager at Newedge Japan. “But the market is supported because of fears over the Middle East.”

The lack of any major news event for the day, concerns over demand and Middle East supply worries will keep oil trading in a tight range of $3 a barrel for the next 24 hours, with Brent seen swinging between $110.50 and $107.50, Hasegawa said. The U.S. benchmark will trade around $86.50 and $84 a barrel, he said.

U.S. lawmakers return to Washington on Tuesday with a seven-week deadline to reach agreement on scheduled tax hikes and budget cuts that threaten to trigger another recession.

Both Democrats and Republicans generally agree on the need to avoid the jolt of $600 billion in deficit-reduction measures they all agreed to in August 2011. But the main disagreement is focusing on whether to extend tax cuts for everyone, as Republicans want, or just for those earning below $250,000 annually, as the president wants.

Across in Europe, global lenders held back from giving further aid to debt-stricken Greece, but gave the country two more years to make the cuts demanded of it.


Brent has stayed over $100 through most of this year despite a weakening demand outlook, and touched a high of $128 in March, on worries of a supply disruption from the Middle East as tensions escalated over Iran’s disputed nuclear programme.

The United States and Europe have imposed tough sanctions on Iran to choke off Tehran’s oil revenues to halt the programme, which the West claims is aimed at building atomic weapons. Iran denies any such plan.

About 8,000 elite and regular army troops will participate in the Iranian military drill, backed by bombers and fighter planes in manoeuvres taking place this week that involve the biggest air drills the country has ever held, the country’s English-language Press TV said.

The announcement comes less than a week after Washington accused Iranian warplanes of firing on a U.S. drone.

“There has always been some fear about supply disruption from the Middle East,” Hasegawa said. “That has kept prices supported, otherwise oil markets would have been a lot lower.”

Reporting by Manash Goswami; Editing by Ed Davies

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