Oil falls heads lower on global concerns
Brent crude was lower today, weighed down by lingering concerns over the health of the global economy, the Greek debt crisis and a stronger dollar.
ICE Brent crude fell 19 cents to $111.20 a barrel by 0622 GMT and was headed for its third straight session of losses. US crude was at $94.84 a barrel, down 10 cents.
Concerns over Chinese bank credit emerged today, after ratings agency Moody's said China's local government debt may be 3.5 trillion yuan ($540 billion) larger than auditors estimated, potentially threatening the credit ratings of the country's lenders.
The news comes days after data showed China's factory sector grew at its slowest pace in 28 months in June, fuelling fears of a drop in demand from the world's second largest oil consumer.
China's fledgling services sector also fell slightly in June but still pointed to solid business expansion as new order growth quickened to an eight-month high, a report on Tuesday showed.
In Europe, the market's initial optimism over euro zone policymakers' approval of an emergency bailout for Greece was tempered by Standard & Poor's negative view on the private sector involvement in a second Greek bailout package.
"There's been a good flow of economic data that has helped oil prices and if that can continue this week we can expect more upside," said Ben Le Brun, market analyst with CMC Markets in Sydney. "But there are concerns still there, including the US debt ceiling and also the softer Chinese data."
US Treasury Secretary Timothy Geithner has warned of huge risks if Congress fails to raise the $14.3 trillion debt ceiling by August 2nd, potentially triggering a default that could send shivers through an already-fragile banking system.
Participants will be closely watching the key US non-farm payrolls report due out this Friday for signs that economic growth in the world's top oil consumer has regained traction.
Weekly US oil inventory data from industry group the American Petroleum Institute and the government's Department of Energy will be delayed by a day to tomorrow and Thursday, respectively, due to yesterday's Independence Day holiday.
Oil prices were also depressed by a stronger US dollar, which rose 0.37 per cent against a basket of currencies by 0624 GMT, making dollar-denominated oil more expensive when purchased in foreign currencies.
The euro slipped from one-month highs against the dollar as the greenback was bought back broadly on a flurry of stop-loss buying and short-covering by macro-funds.
The rally in equities which had helped support oil prices in recent sessions took a breather, as Asian stocks steadied near one-month highs on Tuesday after five consecutive days of gains.
According to technical charts, Brent crude needs to clear resistance at $113 a barrel before developing a decent rally towards a short-term resistance target at $121.47, while US crude is expected to rise to $98.13 a barrel.