Brent falls below $106, eyes French worries

Brent crude fell towards USD 105 a barrel on Thursday, erasing earlier dollar-fuelled gains, on investor concerns that the European debt crisis could spill over to France and harm global economic growth.

Brent was down USD 1.73 at USD 104.95 a barrel by 1237 GMT in a choppy trading session, after earlier rising more than USD 1 on a weak dollar. US oil futures were down USD 1.41 at USD 81.48 by the same time.
Speculation over an impending downgrade of France's credit rating and concern about the financial health of one of its key banks have rattled markets, although three major ratings agencies have reaffirmed its AAA rating.
French bank Societe Generale's boss vehemently rejected rumours that questioned the banks financial solidity and its battered shares recovered some ground.
"Volatility is about people trying to balance fundamentals against the macroeconomic environment. We had constructive numbers on oil stocks but there's macroeconomic uncertainty especially with worries over French banks," said Tony Hall, chief investment officer of Duet Commodities, referring to a drop in US crude stocks the previous day.
Oil prices had rallied on a weaker dollar, with investors reluctant to hold it after the Federal Reserve pledged to keep interest rates near zero. Commodities including oil tend to rally when the dollar falls since it makes them cheaper for non-dollar buyers.
World stocks staged a tentative rally early on Thursday but then turned lower. Positive US economic data showing new claims for umemployment benefits dropped to a four-month low last week but this failed to stop the price slide. Fundamental uncertainity
Uncertainty about the economic outlook hit oil prices hard in early August, with Brent dropping from around USD 117 a barrel to briefly dip below the pyschologically important USD 100 a barrel threshold earlier this week.
While prices have since recovered, rising by around 4% in Wednesday's session, many analysts still consider the outlook for oil demand very uncertain.
The West's energy watchdog the International Energy Agency said in its monthly report on Wednesday that a global economic slowdown may stifle oil demand growth, potentially cutting it by more than half to only 600,000 barrels per day.
"They are telling the market not to take their demand numbers too seriously. It could revise them lower. But at the moment, we are not trading on fundamentals but macro factors," said Eugen Weinberg of Commerzbank.
On supply fundamentals, North Sea oil output is scheduled to rise by 19% in September due to a reduced impact on supplies from maintenance at oil installations, expanding production from the home of the Brent oil benchmark.
Sentiment in the oil market was given a short-lived boost by news on Wednesday that US crude stocks declined 5.23 million barrels to 349.75 million barrels in the week to Aug. 5 as imports fell slightly and refinery utilization increased, according to the US Energy Information Administration. Analysts polled by Reuters had projected a 1.5 million barrel build on average.