Oil prices fell on Tuesday on revived concerns about the eurozone region's debt problems and their potential to slow the global economy, even as tensions between Iran and the West helped limit losses. Europe's policymakers are struggling to come up with a plan to prevent a Greek default, which would harm the global economy and depress demand for energy.
Eurozone finance ministers on Monday rejected as insufficient an offer made by bondholders to help restructure Greece's debts, sending negotiators back to the drawing board and raising the threat of a default. "Crude oil prices are lower on the back of softer equities and a weaker euro on fresh worries over Greek debt," Tim Evans, energy analyst at Citi Futures Perspective, said in a note.
Brent March crude fell 55 cents to settle at $110.03 a barrel after reaching $111.11. It fell to $109.70 intraday, above front-month Brent's 100-day moving average (MA) at $109.55 and with the 50-day MA at $109.36 and the 300-day MA at $109.28 awaiting below as tests of support. US March crude fell 63 cents to settle at $98.95 a barrel, below the front-month 50-day moving average of $99.19.
Total Brent trading volume was 8 percent above its 30-day average, while US turnover was 16 percent below its 30-day average. Both were below half million lots traded in post-settlement trading. The eurozone debt crisis is escalating and could derail the global economic recovery, the International Monetary Fund warned. Europe's debt situation weighed on European and US equities and the euro, helping to lift the dollar index . A stronger greenback tends to depress dollar-denominated oil prices.
Investor caution was anticipated as the US Federal Reserve opened a two-day meeting on Tuesday that was expected to end with a signal that interest rates will be held near zero into 2014. Continuing the low-interest rate policy would be supportive to commodities prices that benefit from the increased liquidity provided by the inexpensive borrowing costs.
President Barack Obama said the United States would continue to impose new sanctions on Iran over Tehran's disputed nuclear program after the European Union agreed on Monday to ban imports of Iranian crude starting in July. Iran reiterated its threat to shut the Strait of Hormuz oil-shipping route if the EU sanctions affect the country's oil exports, and the potential for disruptions to supplies from the region continues to limit losses in oil prices.
US heating oil futures, the benchmark distillate contract, and US gasoline posted higher settlements in spite of recent inventory increases and the mild start to the winter season in most of the country. "Products are seeing some support, however, as European independent Petroplus moves into bankruptcy," Evans said. Swiss-based oil refiner Petroplus said it was filing for insolvency.
Europe's largest independent refiner by capacity has stopped three refineries in Switzerland, France and Belgium and plans to begin shutting one in England by week's end. US retail gasoline demand rose last week against the previous week, although it remained depressed versus the year-ago period.
The freight tonnage hauled by American trucks rose 6.8 percent in December from the previous month, the American Trucking Association said in a separate report. The 5.9 percent rise in 2011 was the biggest in 13 years, the ATA said. US crude stockpiles were expected to have increased by 800,000 barrels last week, according to a Reuters survey of analysts on Tuesday . Gasoline stockpiles were expected to be up 1.9 million barrels , while total distillate stocks were seen unchanged. Investors receive a fresh snapshot of US commercial oil inventories starting with data from industry group American Petroleum Institute on Tuesday, followed by the government's report on Wednesday.