Oil slips on eurozone woes, inventory build

LONDON: Oil prices slipped on Thursday to around $109 a barrel as uncertainty over the Greek bail out weighed on sentiment and the market digested bearish news of a crude oil inventory build in the United States.

Brent crude for December was down 32 cents a barrel at $109.02 by 0917 GMT, after slipping as low as $107.83 in Asian trading. US crude fell 21 cents to $92.30 a barrel.

Brent futures have fallen for a fifth straight session, their longest losing streak since June, with eurozone tensions escalating following Greece's decision to hold a referendum in December on a bail out plan intended to resolve the debt crisis.

Germany and France told Greece it would not receive another cent in European aid until it decided whether it wanted to stay in the euro zone.

"Payments are being put on hold until the outcome of the referendum - that means we have at least another month of uncertainty," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

"We are in a risk-off mood again," he added, pointing to the bearish outlook from the US Federal Reserve. On Wednesday it slashed its forecast for growth and raised projections for unemployment.

The euro retreated, gold and base metals weakened, and European stocks sold off. The dollar rose 0.19 percent against a basket of currencies as investors sought the safe-haven asset.

Oil prices were also affected by Wednesday's data from the US Energy Information Administration. This showed crude stocks rising 1.83 million barrels to 339.46 million barrels in the week to Oct. 28, against consensus expectations of a 1.1 million barrel build.

"It's a second consecutive inventory build, and the disappearance of the overhang is raising questions about the sustainability of the backwardation in the WTI curve," said Fritsch. "The only bright spot was the strong demand for distillates and the continued draw in those stocks."

According to Reuters' technical analyst Wang Tao, Brent is expected to fall back to the Tuesday low of $106.10 per barrel, while US oil is expected to fall towards $89 per barrel.

Olivier Jakob, oil analyst at Petromatrix, said that the picture for Brent was "even more direction-less than WTI. Bears were burned on Tuesday, bulls were burned on Wednesday. There is absolutely no momentum in Brent; it is however very slowly grinding lower".

Later on Thursday the market will be looking to the European Central Bank's rate decision and Mario Draghi's first press conference as president. A rate change is not expected but the market will monitor Draghi's comments to see if a rate cut is signalled for December.

Copyright Reuters, 2011