Brent Steady Above $107; Europe Woes Weigh
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The worries echoed across financial markets. Asian stocks sank, the euro languished near a two-month low, gold plunged to a seven-week low and copper fell after posting its biggest decline in three weeks. Oil will be driven by headlines on Europe's fiscal condition and Wednesday's OPEC meet, with support coming from supply uncertainties in the Middle East.
Brent fell 3 cents to $107.23 a barrel by 0630 GMT, after sliding to as low as $107.07 and settling down $1.36. US crude also fell 3 cents to $97.74, after settling $1.64 lower, trading below $100 for a third day.
"Markets probably are thinking the euro zone is taking too long to get its act together," said Tony Nunan, risk manager at Mitsubishi Corp. "But it's also true that you can't force things at any quicker rate because of the sheer number of countries involved in the decision making process."
The uncertainty worsened after ratings agency Moody's said it would review ratings of all EU member states in the first quarter of 2012, while rival Fitch said the summit had failed to provide a "comprehensive" solution to the debt crisis.
Oil investors are awaiting the outcome of a meeting of producer group OPEC on Wednesday. The group on Monday targeted a new 30-million barrel-a-day production deal aimed at healing the rift left by a bad-tempered failure to reach an output agreement when it last met in June.
At stake for the Organization of the Petroleum Exporting Countries is a credible policy going into a year when a sluggish global economy could undermine fuel demand and send oil prices tumbling from over $107 a barrel now.
"It would be in the OPEC members' best interest to come up with an agreement after they failed to do so in the last meeting," said Natalie Robertson, an analyst at ANZ Bank.
Without a collective supply target, OPEC members with spare capacity - Saudi Arabia and its Gulf Arab allies - remain free to pump at will.
Saudi Oil Minister Ali al-Naimi confirmed on Monday that the kingdom pumped 10.047 million barrels per day in November.
"Whether or not OPEC agree to a ceiling, we see the end result being that Saudi Arabia, Kuwait and the UAE will be the main swing producers in the rebalancing process over the next six months," JPMorgan analysts said in a report.
US commercial crude stockpiles are expected to have fallen on average 1.6 million barrels for last week, a preliminary Reuters poll of seven analysts showed.
Financial markets are awaiting the outcome of a US Federal Reserve meeting later in the day. The policy-setting Federal Open Market Committee looks set to hold off on easing monetary policy as it gauges the impact of Europe's crisis.
The United States has had a series of positive numbers, raising hopes of a steady economic recovery in the country, helping boost demand in the world's biggest oil consumer.
"The market is also starting to focus on what the Fed will say about its outlook for policy, and a general guidance on the outlook of the economy," said Robertson at ANZ Bank.
Unrest in the Middle East is helping put a floor under prices as participants worry about supply disruptions.
An explosion ripped through a gas pipeline near the town of Rastan in the central Syrian province of Homs and flames were seen rising from the site, a witness said, the second reported blast at an energy pipeline in Homs in a week.