SINGAPORE: Brent crude slipped towards $114 on Monday, weighed down by a stronger US dollar and the risk that a sovereign debt default by Greece could tip the euro zone in to a demand-sapping recession.
However, losses were limited by escalating tension between Iran and the West, which threatens to disrupt supplies from the world's fifth-largest crude oil exporter.
Front-month Brent crude fell 30 cents to $114.28 a barrel by 0317 GMT, snapping four straight days of gains. Brent rose 2.8 percent last week to settle near a three-month peak on Friday, after a positive US jobs report fueled hopes of stronger demand in the top petroleum-consuming nation.
US crude was down 59 cents at $97.24 a barrel, after posting a loss of 1.73 percent last week.
"There's still not much confidence over the euro zone economies, and that is limiting upside from strong US data and the tensions in Iran," said Ken Hasegawa, a commodity derivatives manager with Newedge Brokerage in Tokyo.
Coalition parties in Greece, which is at the centre of Europe's two-year old debt crisis, must tell the European Union by Monday whether they accept the painful terms of a new bailout deal worth 130 billion euros in order to avoid a disorderly default.
The greenback strengthened against a basket of currencies after the euro softened ahead of the Greek deadline, making dollar-denominated commodities like oil more expensive when purchased in other currencies.
"One of the key risks in the European situation is the possibility that Greece will not achieve agreement to the austerity measures being required of them," said Ric Spooner, chief market analyst with CMC Markets in Sydney.
IRAN SUPPORTS
Oil prices remain supported by growing tensions in the oil-producing region of the Middle East, as Iran continued to threaten military action in its increasingly volatile stand-off with world powers over its nuclear ambitions.
Iran's deputy Revolutionary Guards commander said on Sunday Tehran will target any country used as a launchpad for attacks against its soil, days after the country's supreme clerical leader threatened reprisals for the West's new ban on Iranian oil exports.
BRENT/WTI
US crude could weaken further relative to Brent after the spread between the two benchmarks briefly moved above its 200-day moving average just above $17 last Friday.
The spread was at $17.07 a barrel by 0307 GMT, widening 33 cents from last Friday's settlement.
"Traders will be looking to push the spread wider after it breached the technical support level of $17. We could see it widening further in the near term," said Hasegawa.
Brent is expected to retrace moderately to $114.20 per barrel, before breaking a resistance zone of $115.12-$115.29 and heading towards $116.79, according to Reuters market analyst Wang Tao.
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