LONDON: Brent crude oil slipped to $110 on Tuesday as investors looked away from tension between Iran and the West and supply concerns in Africa and focused on the chances of a Greek debt default that could hit energy demand.
President Barack Obama said the United States would impose new sanctions on Iran over its disputed nuclear programme after the European Union agreed on Monday to ban imports of Iranian crude starting in July.
Iranian politicians responded to the EU with a renewed threat to block the Strait of Hormuz, a crucial oil chokepoint, if Iran's exports were blocked, and raised the possibility of an immediate halt to oil sales to Europe
But after weeks of tense exchanges between Tehran and Washington's allies and escalating sanctions, markets shrugged off the latest Middle East tension.
European policymakers are struggling to come up with a plan to save Greece from a default that would hurt the region and the global economy, depressing energy demand.
Euro zone finance ministers on Monday rejected as insufficient an offer made by bondholders to help restructure Greece's debts, sending negotiators back to the drawing board and raising the threat of a default.
Front-month Brent crude slipped 68 cents to $109.90 per barrel by 1105 GMT. US crude was down about 58 cents at $99.00.
"Yesterday's announcement by the EU regarding an oil embargo against Iran failed to lift prices since it was well expected and pre-announced in advance," said Carsten Fritsch, a commodities analyst at Commerzbank.
"There's still some risk regarding threats to close the Strait of Hormuz, or threats from Iran to stop oil exports to the EU immediately," Fritsch said. "But it seems like the market doesn't believe Iran will do so given its dependence on oil revenues."
Tobias Merath, head of global commodity research at Credit Suisse, said the fact US crude futures did not break up through $100 per barrel on Monday despite the EU embargo suggested the market was beginning to discount issues surrounding Iran.
"This suggests that the news is largely priced in. It also suggests that beyond $100 upside potential for oil should be limited," Merath wrote in a research note on Tuesday.
SOUTH SUDAN
South Sudan's government said on Monday it would shut off oil production over a dispute with its northern neighbour, Sudan. South Sudan produces about 350,000 barrels per day (bpd), according to official estimates from November.
President Salva Kiir Mayardit accused Khartoum of having "looted" revenues amounting to roughly $815 million and building a tie-in pipeline to divert 120,000 bpd of southern production flowing through the north.
In a possible boost for oil demand, German manufacturing showed an expansion in January for the first time since September, according to the purchasing managers' index (PMI) survey by Markit.
Another factor influencing prices is data due later on Tuesday from the American Petroleum Institute on stockpiles in the world's top oil consumer, the United States.
Commercial crude inventories are expected to have risen 800,000 barrels for the week ended Jan. 20 due to higher imports and slightly lower refinery runs, a preliminary Reuters poll of analysts showed.
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