Oil declines to $111 a barrel

Brent crude fell to near $111 today, snapping six days of gains, after trade data from China pointed to slower demand in the world's second-largest oil consumer.

China's September crude oil imports shrank from the previous month despite expectations of a gain in demand as new refineries opened and some units restarted after scheduled maintenance.

Total exports from the world's largest factory were also lower than expected, dealing another blow to investors already worried about the worsening sovereign debt crisis in Europe and a possible recession in the United States.

Brent crude for November fell 25 cents to $111.11 a barrel, after a gain of 11.6 per cent over the previous six sessions.

US November crude slipped 77 cents to $84.80 a barrel, after tumbling to an intraday low of $84.64.

The weaker Chinese data came after global oil forecasting agencies cut 2011 demand estimates this week, stressing risks to growth because of gloomy economic conditions.

Brent's premium to US crude stayed at above $26 a barrel. The spread widened following a decision on Tuesday by the Dow Jones-UBS Commodity Index, which had some $80 billion in tracking funds at the middle of the year, to add Brent as a component in 2012 and reduce the weighting for the US-traded West Texas Intermediate.

Tighter supply stemming from production issues in the North Sea and lower output forecasts from oil producers such as Azerbajian may also underpin prices.

Geopolitical tensions brewed as Saudi Arabia and the United States traded charges with Iran yesterday over an alleged plot to kill the Saudi ambassador to Washington, deepening divisions and sharpening a contest for power in the oil-rich Gulf.

In Europe, growing hopes that the euro zone is a step closer to expanding its financial rescue fund to help contain the region's debt woes and head off a systemic banking crisis shored up Asian equities today.

Investors are watching today for US government oil inventories data, which is expected to show a build in crude stockpiles as imports rebounded and refinery utilisation rates fell.

Reuters