NEW YORK (Reuters) - Oil prices fell on Monday on concerns about the euro zone’s economy, but the decline was limited by fears about Iran’s threats to shut the Strait of Hormuz oil-shipping route and Tehran’s ongoing dispute with the West over the Iranian nuclear program.
A drop in German industrial output in November served as a reminder that even the European Union’s (EU) economic powerhouse faces challenges, though Germany’s exports rose in the same month.
Germany and France warned Greece it will get no more bailout funds until it agrees with creditor banks on a bond swap.
Iran’s threats to block the Strait of Hormuz if sanctions affect Tehran’s oil exports have limited oil price losses. Iran on Monday confirmed it had started uranium enrichment at its Fordow nuclear plant.
The EU is expected to move up to January 23 a key meeting on whether to embargo Iran’s oil, according to EU diplomats. The question originally expected to be addressed at a summit of EU leaders set for January 30.
“Overall, the geopolitical premium is supporting amid tensions with Iran, but on the other hand the price of crude in euros remains high and will hurt demand in Europe,” Olivier Jakob from Zug-based consultancy Petromatrix said.
Brent February crude fell 61 cents to settle at $112.45 a barrel, having dropped below its 200-day moving average of $112.72 after gaining more than 5 percent last week.
U.S. February crude fell 25 cents to settle at $101.31 a barrel, having dropped to $100.10 and finding support above the key $100 level.
Crude trading volume continued last week’s recovery from reduced holiday and year-end volumes. Brent volume was 49 percent above its 30-day average and U.S. dealings were 25 percent above its 30-day average in post-settlement trading.
Speculators increased their net long positions in Brent crude oil and gas oil futures and options in the last week of 2011 and first trading day of 2012, IntercontinentalExchange data showed on Monday, as tensions between Iran and the West pushed up oil prices.
U.S. heating oil and gasoline futures managed higher settlements, though less than a penny higher, as uncertainty about European the credit-freeze problems of independent refiner Petroplus PPHN.S supported refined products prices.
The euro rebounded from a 16-month low against the dollar but also saw choppy trading as investors pared short positions but remained bearish eyeing euro zone developments. <USD/>
Europe’s debt crisis and the inability of Europe’s leaders to get it resolved remained a headwind and pushed key industrial feedstock copper lower. <MET/L}
U.S. equities edged up, but also in seesaw trading, as a tug-of-war between investor optimism about U.S. corporate earnings and fears about lower demand for Europe’s debt at auctions this week continued.
Investors kept an eye on Nigeria, OPEC member and Africa’s top oil producer, as thousands of people took to the streets to protest the end of fuel subsidies. Police killed two protesters and wounded more on Monday.
Nigeria’s crude oil output remained normal despite the strike, sources at two international oil companies and the state firm told Reuters.
Top exporter Saudi Arabia pumped 9.8 million bpd in December, down from 10.05 million bpd the previous month, an industry source said.
The reduced output increases the spare capacity available to Saudi Arabia to meet any supply disruptions resulting from Iran’s moves or Nigerian turmoil.
Brokers and analysts also cited the reweighting of the world’s biggest commodity indexes, the S&P GSCI Index .SPGSCI and the DJ-UBS Index .DJUBS, as supportive to Brent and a source of volatility this week.
This involves funds selling off more than $6 billion worth of U.S. crude futures and buying more than $5.4 billion of Brent crude, analysts estimated.
Anticipation of the previously announced index reweighting was cited as a factor in the causing Brent/U.S. crude spread to widen by nearly $3 a barrel last week to near its widest point since mid-November.
Brent’s premium to its U.S. counterpart also had a choppy trading trajectory on Monday, but it narrowed late and finished lower at $11.14 based on settlements.
Additional reporting by Gene Ramos in New York, Zaida Espana in London and Seng Li Peng and Francis Kan in Singapore; Editing by Marguerita Choy and David Gregorio