SINGAPORE: Brent oil slipped below $109 per barrel on Monday as worries about a looming fiscal calamity in top consumer the United States renewed fears of a further slowdown in oil demand growth.
Concerns about the United States tipping into recession as a result of about $600 billion in expiring tax cuts and spending reductions weighed across financial markets, pushing Japan's Nikkei average to a four-week low. But oil price losses were checked by recent data showing China's implied oil demand surged in October.
Brent crude, which slipped as much as 50 cents to $108.90 a barrel, was trading down 15 cents at $109.25 by 0546 GMT. US oil gained 6 cents to $86.13, after ending up more than 1 percent last week following a three-week slide.
"Traders will be on the sidelines till the time there is clarity on the core risk issues concerning the global economy," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "The US fiscal cliff is a source of concern."
Oil markets were also pressured by data showing Japan's economy shrank 0.9 percent in July-September from the previous quarter. It was the first contraction in three quarters, suggesting faltering global demand and weak consumer spending may push the economy into a mild recession.
Brent gained 2 percent on Friday while the US benchmark increased more than 1 percent, a rise some saw as an opportunity to sell and lock in profits.
"Friday markets rallied, so it is normal to have a bit of a sell off after a rally," said a Singapore-based trader. "Also, Japan GDP is down sharply and that's weighing on markets."
Brent is expected to revisit its Nov. 8 low of $106.12 per barrel as it seems to be consolidating within a triangle, according to Reuters technical analyst Wang Tao.
Yet, the fall in Brent from a high of $116.20 touched on Oct. 16 - its loftiest since Sept. 17 - may have been excessive and prices may recover towards $112, Spooner said. US oil may rise to $90, he said.
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