Brent falls below $108 a barrel

December 07, 2012 - 1:25:35 am

LONDON: Brent crude oil fell below $108 a barrel yesterday after comments by European Central bank President Mario Draghi raised the prospect of further weakness in the euro zone and a bleaker outlook for oil demand.

“The Governing Council continues to see downside risk to the economic outlook for the euro area,” Draghi told a news conference after an ECB policy meeting. Oil prices reacted to the statement swiftly, falling more than 50 cents per barrel. Brent crude was down $1.25 to $107.56 a barrel by 1430 GMT. US crude lost $1.35 to $86.53 a barrel.

The market was already worried about the prospects for oil demand. The United States faces year-end tax increases and spending cuts that threaten to push the world’s largest economy back into recession and dent demand from the world’s top oil consumer.

The US economy is growing again after a long slowdown, but economic activity is still sluggish and unemployment is high.

Across the Atlantic, data showing that eurozone shoppers cut back on spending in October by the biggest margin in six months also weighed on oil prices. Ahead of Opec’s policy setting meeting next week, analysts eye the future development of production quotas.