LONDON: Brent crude reversed earlier gains and drifted below $119 on Thursday after hitting multiple-month highs in the previous day as fears of a delay in a second bailout package for Greece weighed down global markets.
The fall was limited as worries about supply disruptions from the Middle East amid concerns over Iran's nuclear programme gave support.
Brent crude fell 27 cents to $118. 66 a barrel by 09 4 4 GMT. On Wednesday, it hit a session peak of $119.99, the highest intraday price since August, and settled at $118.93, the highest settlement since June.
US crude slipped 5 2 cents to $101.2 8 .
"We have some retracement after yesterday's Iran stories and generally a risk off on yet another postponement of the Greek deal," said Thorbjorn bak Jansen, oil analyst at Global Risk Management in Copenhagen.
Global markets were broadly subdued as a delay in a decision on a crucial bailout for Greece unnerved investors and prompted a pause in the market rally that has marked the start of 2012.
The euro eased to a 3 week-low against the dollar. The FTSEurofirst index of top European companies opened down. After falls in Asia, the MSCI world equity index was down 0.6 percent.
"The postponement of another EU bail out decision is hampering today's markets, with no answer on Greece, we continue to exist in no-man's land," said Ben Taylor, sales trader at CMC Markets, said in a report.
Investor sentiment was also hit as ratings agency Moody's warned on Thursday it may cut the credit ratings of 17 global and 114 European financial institutions in another sign the impact of the euro zone government debt crisis is spreading throughout the global financial system.
Tensions over Iran, export disruption from South Sudan and an expected fall in North Sea oil output in March have been capping any drop in prices.
Iran, the world's fifth largest oil exporter, proclaimed an advance in nuclear know-how. It has proposed an early resumption of long-stalled nuclear talks with world powers, according to a letter from Tehran to European Union policy chief Catherine Ashton obtained by Reuters on Thursday.
Iran's ambassador to Russia said on Thursday plans to cut off supplies of Iranian crude to Europe would only benefit the Islamic republic, which in the past has been heavily dependent on imported fuel due to restricted refining capacity.
But its oil ministry denied an Iranian state television report on Wednesday that the country was halting its crude exports to six European countries before the EU ban on Iranian crude become effective later this year.
The spread between prompt April Brent and the May contract rose to a premium of 76 cents a barrel, or backwardation, reflecting the lower North Sea output expectations in March while the prompt spread briefly fell to discounts in late January.
Meanwhile, the premium of North Sea benchmark over US crude rose above $17 a barrel as crude stocks held at Cushing, Oklahoma, delivery hub for US crude increased to their highest level since September.
The stocks at Cushing posted a 2 million-barrel build, the biggest weekly increase since December 2009, while the overall US crude inventories fell modestly last week, the latest US government data showed on Wednesday.