Reuters reported that Brent crude edged down as investors cautiously eyed a European Union summit for a resolution to the region's debt crisis but prices stayed above USD 111 per barrel on concerns over supply from Iran and South Sudan.
EU leaders are expected to sign off on a permanent rescue fund for the euro zone at the summit on Monday and agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions. Asian shares base metals and gold were trading lower on concerns about Europe.
Brent crude fell 36 cents to USD 111.10 per barrel by 0423 GMT and US crude was down 46 cents at USD 99.10 per barrel. Both contracts gained more than 1% last week.
Mr Victor Shum senior partner at oil consultancy Purvin & Gertz said that "The deteriorating economy in Europe is being priced in and there is a concern on whether we'll face EU led recession."
Greece and its private creditors are expected to have a debt swap deal ready this week that is essential for sealing a new bailout and avoid an uncontrolled default. Yet, talks are increasingly problematic as its official lenders are demanding unpopular reforms in the debt laden country.
The International Atomic Energy Agency is in Iran for inspections on its controversial nuclear program that has drawn tough sanctions from the West. The IAEA delegation began inspections on Sunday to try to advance efforts to resolve a row about the nuclear work which Iran says is purely civilian but the West suspects is aimed at seeking a nuclear weapon.
The IAEA visit could spark off more rhetoric’s between Tehran and the West in the next few days, adding more volatility to the oil markets, Purvin & Gertz's Shum said.
Iran had vowed to stop oil exports soon to some countries but postponed a parliamentary debate on a proposed halt to crude sales to the EU, sending conflicting signals in the dispute.
The EU, which accounted for a quarter of Iran's crude sales in the third quarter of 2011 will implement its own embargo on Iranian oil by July while the United States wants Asian buyers to cut imports.
India, a major customer for Iranian crude, has said it would not join the wider international efforts to put pressure on Tehran by cutting oil purchases.
Supply disruption in Africa also supported oil prices. South Sudan has totally shut down oil output in a row with Sudan over export transit fees and will only restart after the two reach a deal covering border security and the disputed Abyei region.
(Sourced from Reuters)
