LONDON: Oil fell on Wednesday as worries about Europe's debt problems reasserted themselves, reversing earlier gains prompted by a blast in Tehran that highlighted the possibility of oil supply disruption from Iran.
Brent crude oil futures were 53 cents down at $112.75 a barrel by 1503 GMT, off an intraday low of $112.62. US crude was down $1.12 at $101.12 a barrel.
European debt problems were brought to the fore by comments from ratings agency Fitch that pushed demand-sensitive assets like oil and equities lower.
The European Central Bank should ramp up its buying of troubled euro zone debt to support Italy and prevent a "cataclysmic" collapse of the euro, said David Riley, the head of sovereign ratings for Fitch.
Oil had risen earlier after an Iranian nuclear scientist was killed by a bomb placed on his car in an attack Tehran's deputy governor blamed on Israel, reigniting worries about supply from the region.
Oil investors worry that tensions between the West and the Islamic republic could escalate further after the bombing, which comes as the United States seeks to persuade China to help toughen sanctions against the exporter over its nuclear programme.
However, some analysts said the impact on oil may not be as great as some were expecting.
"Oil's down on a general risk-off play, but I think people are also starting to reassess just how much impact events in Iran will have," said Gareth Lewis-Davies, analyst at BNP Paribas.
"Any EU embargo will take time to be put into place, and the oil will just end up going to Asia, while Saudi Arabia will increase its production."
INVENTORIES AWAITED
China gave no hint on Wednesday of giving ground to US demands to curb Iran's oil revenues, rejecting Washington's sanctions on Tehran as overstepping even as Treasury Secretary Timothy Geithner lobbied for Beijing's support.
Analysts said the market was eyeing a European Union meeting on Jan. 23 to decide on an oil embargo on Iran as it refuses to abandon its nuclear effort, which the United States and its allies believe is aimed at producing arms.
"I think the geopolitical risk factors will keep the market supported," said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo. "We still have the Jan. 23 meeting coming up and the Nigerian unrest."
Nigerian oil workers threatened on Wednesday to shut down output in Africa's top crude producer, deepening a national strike over a more than doubling of petrol prices.
Investors were also waiting for inventories data from the Energy Information Administration to gauge the supply picture in the United States after data from the American Petroleum Institute showed US crude stockpiles were up 397,000 barrels in the week to Jan. 6.
A Reuters poll of 10 analysts forecast an 800,000-barrel rise in domestic oil inventories, with all but two analysts expecting a build in stocks.
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