Oil slips for 2nd day on debt concerns, dollar

Brent crude slipped below USD 112 a barrel on Monday as Europe stumbled over attempts to solve the euro zone debt crisis, strengthening investor fears commodity demand growth may slow.

Oil futures fell for a second day, sliding along with stocks, metals and the euro, while the dollar and gold rose. Markets are seeking safer assets ahead of a Federal Reserve meeting that may hint at further measures to bolster the world's biggest economy. Brent crude lost 85 cents to USD 111.37 a barrel at 0506 GMT, after declining to USD 111.21, the lowest intraday price since Wednesday. US crude slipped USD 1.29 to USD 86.67 a barrel. "Look at what's happening in Europe. People are beginning to see that it is taking a lot longer than anticipated to resolve the issue," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney. "Longer uncertainty means the demand outlook for oil remains weak." Oil may remain under pressure this week, with US housing data today giving some lead on the state of the economy and an overall picture for oil demand, Barratt said. Participants will also await the outcome of the Fed meeting on Wednesday and a G20 gathering on Thursday and Friday for clues on steps governments and policymakers may take to restore market confidence. Brent will remain neutral and stay in a range of USD 110.42-USD 116.60 per barrel, with a downside bias, while a bearish target has been established for US oil at USD 85.52 per barrel, according to Reuters technical analyst, Wang Tao. Europe crisis rumbles on An EU finance ministers meeting in Poland over the weekend broke no new ground in dealing with the crisis, prompting market players to reduce risk. Greece failed to announce new austerity measures even after pledging to take tough decisions needed to secure a fresh round of international aid and avoid default. That led to the euro edging back towards a seven-month low against the dollar reached last week. The greenback rose as much as 0.8% against a basket of major currencies, making dollar-denominated oil more expensive for consumers. "The EU finance ministers' meeting over the weekend ended without making substantial progress toward solving the region's debt crisis, or any pledge to recapitalise Europe's banks," ANZ Bank said in a report. "European leaders remain firmly against fiscal stimulus due to debt concerns." Participants are also trying to assess how early Libya could start exporting oil to help ease supply concerns as winter approaches in the northern hemisphere. About 1.6 million barrels of crude shipments were halted after infrastructure in major fields was destroyed. "The latest comments from officials at Libya's Arabian Gulf Oil Company suggest that production is ramping up rapidly and that production from the Sarir and Mesla oil fields are expected to reach 200,000 barrels per day by the end of September," analysts at JPMorgan said in a report. Fears of the unrest spreading to other nations in the Middle East and North Africa continue to put a floor on prices as Yemen steps up attacks on protesters. At least 26 people were shot dead and hundreds wounded when security forces fired on demonstrators who charged police lines in capital Sanaa, in a dramatic escalation of protests against President Ali Abdullah Saleh.