Oil below $111 on weaker demand
Oil fell below $111 a barrel this morning on growing concern that oil demand may be weakening in the short term as global economic activity remains subdued.
Output cuts from top oil exporter Saudi Arabia suggest the country may be worried about demand - at least at the start of the year. And faster-than-expected inflation in China may limit growth in the world's second-biggest oil consumer.
"Although the sharp Saudi production cuts last month toward 9 million barrels a day were widely mentioned as a bullish consideration, we viewed the reduction as further evidence of global demand weakening and consequently deserving of a bearish checkmark," said a research note from Jefferies Bache.
Brent futures dropped $1.32 to $110.57 per barrel by 11.13 GMT. US crude was off 64 cents at $93.18.
Oil had gained support from better-than-expected trade numbers from China, relief after the short-term resolution of the US fiscal crisis and data showing a sharp drop in US crude imports in the last week of 2012.
But some of the optimism was sapped by data showing that China's annual consumer inflation accelerated to a seven-month high of 2.5 per cent in December.
"China's inflation was hotter than expected which might add a little bit of downside risk and some investors may be cashing in profits," said Ben Le Brun, market analyst at OptionsXpress.
Traders said investors this quarter will focus on further talks between U.S. lawmakers to resolve the debt crisis and seek cues on the global economy amid expectations that world growth in 2013 may be faster than 2012.