SINGAPORE: Brent crude fell below $108 on Friday, on growing concern that European policy makers will fail to deliver a concrete plan to tackle the euro zone debt crisis at a meeting later in the day, an outcome likely to hurt prospects for demand.
Hopes for a resolution to the region's debt woes dwindled after the European Union failed to secure backing from all 27 countries to change the EU treaty at a summit on Friday.
This comes a day after the European Central Bank (ECB) dashed hopes for more supportive measures beyond an expected interest rate cut, overshadowing positive economic data from top oil consumers US and China.
Brent crude fell 94 cents to $107.17 a barrel by 0340 GMT, after settling Thursday $1.42 lower at $108.11 a barrel. US crude was down 61 cents to $97.73, after plunging more than $2 a day earlier on the ECB news.
For the week, both benchmarks are poised for a fall of 2.9 percent, reversing gains last week.
"Before the ECB acts further, the EU has to come together, but the market doesn't believe the EU can get its act together. They will likely do the bare minimum and prices are going to react month to month as they muddle through this crisis," said Tony Nunan, a risk manager with Mitsubishi Corp in Tokyo.
EU leaders are committed to a new "fiscal compact" for the euro zone, including much tighter control of public finances and, in the longer term, could consider joint debt issuance, an early draft of conclusions at an EU summit said on Thursday. Key elements were, however, immediately rejected by Germany.
Prices fell despite data showing China's annual inflation rate falling in November to 4.2 percent, the lowest level in more than a year, fuelling expectations of further monetary policy easing at the world's no.2 oil consumer.
"I think these figures will help confirm a clear shift in the monetary policy and the first interest rate cut would be seen in the first quarter of next year," said Wang Jin, analyst with Guotai Junan Securities in Shanghai.
The rate is now close to the government's official target of 4 percent and has dropped rapidly since hitting a three-year high of 6.5 percent in July.
Euro zone concerns also trumped fresh signs that the US economic recovery was gaining traction, as jobless claims fell last week to a nine-month low, data showed on Thursday.
IRAN RISK
The risks of a supply disruption from Iran were renewed as
European Union leaders were expected to call for more sanctions against the Middle East nation at a summit Friday in Brussels.
However, they are not likely to make an explicit call yet for an embargo on Iranian crude oil, amid mounting Western concerns that the OPEC producer has worked to design a nuclear weapon.
"The US and Europe are ratcheting up the sanctions against Tehran, but it is far from certain that the punitive measures will alter the regime's nuclear ambitions, and there is a risk that they could precipitate a deeper crisis," said analysts at Barclays Capital in a report.
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