SINGAPORE: Brent crude slipped towards $109 on Wednesday as investors booked profits after prices rose more than $2 in the previous session and worries about the global economy overshadowed concerns over supply disruption from the Middle East.
Jitters over Iran and threats to key shipping lanes made oil post its biggest gain in a month on Tuesday, in sharp contrast to a fall in most other financial markets.
Oil investors are turning their attention on the global growth outlook after the Federal Reserve warned that the turmoil in Europe poses a risk to the US economy.
Brent crude slipped 48 cents to $109.02 a barrel by 0233 GMT, after posting the biggest one-day rise since Nov. 28 to settle $2.24 higher. US crude slipped 34 cents to $99.80, after jumping 2.4 percent, the biggest since Nov. 16.
"There is some profit-taking we are seeing today after oil surged so high yesterday," said Tetsu Emori, a fund manager with Astramax Co. in Tokyo.
"Participants are now focusing back on the European crisis, and that is prompting a broad fall across commodities."
Crude futures briefly surged nearly $4 a barrel after markets opened in New York in the previous session in a furious burst of trading. Other commodities did not jump, and traders remained unable to pinpoint a specific trigger for the surge.
Asian shares drifted lower and the euro floundered near an 11-month low on Wednesday, while copper fell for a third day and gold slipped to its lowest in nearly two months.
Oil was also under pressure from an industry report that showed crude stocks in the world's largest consumer, the United States rose 462,000 barrels in the week to Dec. 9, compared with analysts' expectations for a fall of 2 million barrels.
Distillate stocks rose 1.2 million barrels versus a forecast for a 800,000 barrel gain. A clearer indication on stocks will emerge today with data due from the US Energy Information Administration.
OPEC MEET
Participants are also awaiting the outcome of a meeting of the producer group OPEC. The group's oil price hawks looked set to accept a new output target that legitimises a big increase in supply over the last six months from rival producers Saudi Arabia and its Gulf allies.
A deal expected at a Wednesday meeting should restore some credibility to the Organization of the Petroleum Exporting Countries after talks fell apart in June and left the cartel without its normal self-imposed output constraints.
The expected agreement would put a 30-million barrel-a-day cap on output for all 12 OPEC members for the first half of the year, keeping production near 3-year highs.
That volume would meet demand and leave enough over to rebuild lean stocks by 650,000 bpd over the period, OPEC forecasts.
Extra oil from the Gulf nations since June has helped keep oil prices in check despite the loss of Libyan output and unexpected outages scattered across several non-OPEC producers.
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