Brent oil hangs at $110 as EU debt concerns drag oil prices lower

Brent oil futures open Tuesday’s trading session back at $110 a barrel as continuing EU debt concerns drag crude oil prices lower, following weaker stock markets after German leaders warned that a comprehensive solution to the EU’s debt crisis may not be near.

Latest Brent Oil Price

In London, Brent crude oil futures for December 2011 delivery was trading as $110.39 a barrel, 05.10 GMT this morning on the ICE Futures Exchange. The contract closed yesterday’s trading session at $109.87 a barrel.

EU Debt Concerns

Stock markets headed lower on Monday after Government spokesman Stefan Seibert warned that dreams that everything will be resolved and dealt with by next Monday cannot be fulfilled, referring to the debt situation that clouds the eurozone.

The tone was a marked change from the weekend when, speaking after a meeting of G20 finance ministers and central bankers in Paris, French Finance Minister Francois Baroin said the eurozone answers at the summit would be “decisive”.

Finance ministers from the G20 largest economies had set the 23rd October meeting as the deadline for resolving Europe’s credit problems.

“I think everyone last week decided that the European crisis was over, that it was all going to get solved by the end of the month. Nobody should be hugely surprised because the process in Europe seems to be to promise alot and deliver a little and we’ve seen that for the last year and a half.” said Kate Warne at Edward Jones, St. Louis.

Brent Oil Price Forecast

“There will be substantial downside potential for oil prices, should the high expectations at the EU summit next weekend be disappointed.” according to Commerzbank.

Monday’s fall in Brent, as well as expiry of the November Brent contract Friday significantly narrowed the price spread between the world’s two main oil benchmarks, Europe’s Brent and the US’s WTI. It fell to $24.43 a barrel, down from a record high of $28.10 reached Friday.

But the current tightness in the undersupplied physical crude market in Europe continues to provide strong support to the price of Brent crude, said VTB Capital’s Andrey Kryuchenkov.

“Inventories have been contracting in the past month, mostly due to North Sea tightness as well as production disruptions in Nigeria and North America at a time when Libya’s output shortfall is not being fully compensated for by increased OPEC production.” he said.

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Brent oil hangs at $110 as EU debt concerns drag oil prices lower