Brent slips below $111 on bleak US data, 'fiscal cliff' worries

Ramya Venugopal
Reuters Middle East

* Weak U.S. data, fiscal uncertainties keep markets on


* Israel, Syria worries keep prices supported

* Coming up: U.S. API weekly stocks data; 2130 GMT

SINGAPORE, Dec 4 (Reuters) - Brent futures slipped below

$111 per barrel on Tuesday as demand concerns moved into focus

after weak manufacturing data from top consumer the United

States, while uncertain U.S. fiscal deficit negotiations also

kept investors on the edge.

But supply worries stemming from simmering tensions in the

Middle East including a fragile ceasefire between Israel and

Palestine and worsening unrest in Syria helped cushion prices.

"Oil markets are starting to come off on the

weaker-than-expected manufacturing data and the fact that the

U.S. economic outlook remains unclear," said Natalie Rampono,

commodity strategist at ANZ in Sydney.

"We are also seeing mixed headlines on the "fiscal cliff"

negotiations, so markets have already taken on a cautious

outlook on that account."

Front-month Brent futures slipped 29 cents by 0258

GMT to $110.63, after breaking through a key resistance level to

close below its 200-day moving average in the previous session.

U.S. crude slipped 32 cents to $88.77 per barrel. Following

its inability break above resistance at $90.30, the contract

will probably head into a $87.19-$87.93 range, according to Wang

Tao, Reuters market analyst, commodities and energy technicals.


Investors have been fretting about the fiscal health of the

world's biggest economy, especially in light of the ongoing

weakness in the crisis-ridden euro zone.

Concerns increased after the Institute for Supply Management

(ISM) said on Monday that its index of national factory activity

fell to 49.5 in November from 51.7 the month before, the lowest

since July 2009.

The U.S. data outweighed the positive impact from Chinese

manufacturing data earlier on Monday, which reaffirmed the view

of a pickup in the world's biggest energy consumer.

Adding to jitters is the increasing uncertainty on

negotiations to avert a "fiscal cliff", a $600 billion package

of spending cuts and tax increases effective early 2013 that

threatens to tip the economy back into recession.

The White House dismissed a proposal from congressional

Republicans on Monday that included tax reforms and spending

cuts, saying it did not meet President Barack Obama's pledge to

raise taxes on the wealthiest Americans.


Incessant tensions in the Middle East and related worries

about the impact on oil supplies from the region continue to

support prices.

The biggest concern at the moment is that the fragile

ceasefire between Israel and Palestine may be at risk after

Israel said it will continue to expand its settlements in West

Bank and East Jerusalem.

An escalation of a 20-month old civil conflict in Syria,

which worsened after the government spokesman fled the country

and the United Nations decided to withdraw its non-essential

staff, added to fears of supply disruptions.

Investors are also awaiting inventory data from the American

Petroleum Institute (API) due later on Tuesday. Crude stocks are

expected to have risen by 100,000 barrels in the week ended Nov

30, a preliminary Reuters poll showed.

(Editing by Himani Sarkar)

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