Oil fell for a second day as Europe struggled to tame its debt crisis and the Federal Reserve said companies were increasingly pessimistic about the US economy.
A French-German split over Europe's rescue strategy emerged as finance ministers prepare to meet and the Fed said yesterday that US companies reported more doubt about the strength of the US recovery.
US fuel use declined 2.2 per cent to the lowest since May last week while crude stockpiles shrank, the Energy Department said.
"The market rejected the sizable draw in inventories and decided to focus on what's happening with Germany and France," said Jonathan Barratt, a managing director of Commodity Broking Services in Sydney. "The disagreement put the cat among the pigeons. Economic growth will be hurt even further because there's no resolution out of Europe."
Brent oil for December settlement was at $108.13 a barrel, down 26 cents, on the London-based ICE Futures Europe exchange. That pushed the spread between the December Brent and Nymex crude contracts to $22.29, compared with $22.10 yesterday and a record high of $27.88 on October 14th.
Crude oil for December delivery, the most actively traded contract, slipped as much 88 cents to $85.41 a barrel and was at $85.93, in electronic trading on the New York Mercantile Exchange at 2.25 pm Singapore time.
The contract yesterday fell $2.24 to $86.29, the lowest since October 13th. November futures, which expire today, were at $85.65.
Oil prices have dropped 6.2 per cent in New York this year amid concern that the faltering US economy and Europe's debt crisis will curb raw material demand.
Luxembourg prime minister Jean-Claude Juncker, who chairs a group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt last night failed to resolve differences over the region's rescue plan.
Bloomberg
