Oil prices at 4-week low

Brent oil dived $2 to its lowest in a month today as sovereign debt and economic pain threatened to dent fuel demand, while Japan's intervention to stem the rise in the yen boosted the US currency.

Brent was $2.02 a barrel lower at $111.21 this afternoon, off a session low of $111.03, the weakest intraday price since early July. US crude was $1.30 weaker at $90.63.

"It's all about macroeconomics for the next five days basically," said Olivier Jakob of Petromatrix.

He cited new US employment data, as well as a meeting of the US Federal Reserve on Tuesday and European Central Bank deliberations todday.

Earlier today, the ECB said it was buying government bonds in response to Europe's deep crisis, prompting gold to hit another record and pushing oil down further.

The pursuit of non-risky assets has also strengthened the Japanese yen and Swiss franc.

In an effort to tame its currency, Japan sold one trillion yen ($12.6 billion) and its central bank eased monetary policy on Thursday, a day after Switzerland announced a surprise cut in interest rates.

In response, the dollar firmed against a basket of currencies adding to the bearish mood on the oil market.

Analysts said any strength in the dollar could be short-lived, which theoretically would be a fresh spur to dollar-denominated commodities made cheaper for non-dollar investors.

But the weakness of the US economy and its implications for commodity demand could remain a bigger factor for oil markets than any further decline in the dollar.

Barclays Capital cut its prediction for global oil demand growth this year to 1.1 million barrels per day (bpd) this year, compared with its previous forecast of 1.56 million bpd.

Technical analysts, who forecast future price direction from chart movements, also said the market was very weak after the front-month contract dropped well below its 100-day moving average, a major support level.

Already, oil had fallen more than $3 yesterday after US inventory data showed a rise in stocks and a year-on-year decline in gasoline demand. That added to evidence that expensive fuel and a weak economy have reduced consumption in the world's biggest oil user.

Reuters