SINGAPORE: Brent crude slipped around 0.4 percent on Wednesday as a potential deal between Iran and the UN nuclear watchdog eased fears of oil supply disruptions, while concerns over the debt crisis in the euro zone and a slowing Chinese economy weighed on demand.
The UN's International Atomic Energy Agency expects to sign a deal with Iran soon to unblock investigations into suspected work on atom bombs in the oil-producing country, increasing the prospect of a resolution to a conflict over the issue.
Brent crude had dropped 46 cents to $107.95 a barrel by 0402 GMT and US July crude had fallen 56 cents to $91.29, with economic concerns weighing as the World Bank cut its economic growth forecast for China, the world's second-largest oil consumer.
Nagging fears of a messy Greek exit from the euro zone also remained ahead of a meeting of European leaders. Germany has dismissed a French-led call for euro zone governments to issue common bonds, cooling hopes a day before a European Union summit that the meeting would produce fresh measures to tackle the region's debt problems.
"Elections (in Greece) and the EU Ministers' meeting could potentially cause a lot of headline driven movements in oil prices," said Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp.
Waning optimism about the summit drove the euro down against the dollar and the dollar index strengthened. A stronger greenback can pressure dollar-denominated commodities such as oil by making them more expensive to consumers using other currencies.
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US crude oil inventories rose 1.5 million barrels last week, industry group the American Petroleum Institute said in a report released late on Tuesday, further hurting prices.
Ahead of weekly reports on US oil inventories, crude stocks were expected to have risen 1.0 million barrels last week, a Reuters survey of analysts showed.
The EIA's weekly report is due on Wednesday at 1430 GMT.
Europe is facing a glut of high quality crude oil grades, only a year after Libya created a serious shortage, as demand from the continent falls and the US cuts imports due to greater domestic supply.
This has led to a steep weakening in values for many high quality sweet and low-sulphur grades a rare development that suggests oil futures prices have room to correct further in an over supplied market.
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