NEW YORK: Oil prices fell on Friday as anticipation of a credit downgrade for some euro zone countries pressured the euro and equities, countering the supportive effect of potential supply disruptions in Nigeria or from Iran's threats to shipping.
Credit rating agency Standard & Poor's was set to downgrade several euro zone countries, a senior euro zone government source said. The news pushed the euro to a 16-month low versus the dollar and pressured dollar-denominated oil prices.
European shares turned negative and US stocks fell at the open and the S&P 500 index fell 1 percent.
French television channels later reported S&P had downgraded the French credit ratings, citing a government source.
"While it should be anti-climatic, the realization will also be sobering. In particular, the flight to the dollar will be accelerated, pushing crude oil prices lower," said John Kilduff, partner at Again Capital LLC in New York.
Brent February crude fell 78 cents to $110.48 a barrel at 10:49 a.m. EST (1549 GMT), having fallen to $109.71, just above its 100-day moving average of $100.69, after retreating from its $112.50 high.
The February Brent contract expires on Monday.
US February crude fell 80 cents to $98.30 a barrel having swung from $97.70 to $100.19.
Euro zone concerns had already resurfaced earlier in the session after an Italian bond sale failed to match the success of a Spanish auction the previous day, reflecting the heavy refinancing load Rome faces over the next three months.
Nigerian unions suspended strikes and protests for the weekend while talks between union leaders and government over the scrapping of a popular fuel subsidy continued, but the unions warned of more industrial action if there was no resolution.
Iran's dispute with the West over its nuclear program and Tehran's recent threats to shut the key Strait of Hormuz oil shipping lane continued to be a supportive factor for oil prices, brokers and analysts said.
Russia's departing ambassador to NATO said on Friday that Russia would regard any military intervention linked to Iran's nuclear program as a threat to its own security.
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